A compilation by:
B. Venkateswaran , IRS
Asst. Director DG Systems Chennai
PRESENT INDIRECT TAXES
The textile industry has historically enjoyed tax exemptions on the cotton value chain. Currently, attracts zero Central excise duty (under optional route) .VAT is not applicable on fabrics, but yarn and garments attract VAT according to state rates. On an average, the items used by the textile industry such as machinery and chemical agents have been taxed at around 20% throughout the country. After GST, the average tax rate will be lowered to around 18%.
Central Excise duty
Central excise duty was first introduced on woven garments in year 2001 which was subsequently extended to entire textile industry by 2003. The excise duty exemption option was also provided vide notification no.30/2004 with condition of non-availment of Cenvat credit. There was also an option to pay concessional rate of excise duty with Cenvat credit benefit. However, almost all assesses opted for exemption.
In 2011, mandatory excise duty was reintroduced on branded garments with Cenvat credit benefit and abatement of 55% for duty payment. This mandatory levy was again removed in 2013 and optional scheme of paying duty with Cenvat credit benefit was continued.
In 2016, mandatory excise duty has been introduced again on branded ready made garments made up of textiles falling under Central excise tariff heading 61, 62 and 63. The levy is attracted only when retail sale rice (RSP) is Rs. 1000/- or more and levy is only on 60% value after standard abatement of 40%. For payment of duty, rate of 2% without Cenvat credit or 12.5% with Cenvat credit option is applicable. Non-branded goods continue with “Nil” levy without Cenvat credit benefit. Otherwise, option of paying 6% with Cenvat credit in case of garments / articles of cotton, not containing any other textile material is available. For garments of other composition, “Nil” rate without Cenvat credit or 12.5% with Cenvat credit is available.
VAT / Sales tax
Most of the states in India have exempted textiles and fabrics from levy of VAT / Sales tax. Garments including textiles are being subject to lower rate of VAT / Sales tax in many states. For small players, the option of paying taxes at concessional rates is also provided under composition scheme in many states.
Entry tax is levied on specified goods when goods enter local area, many states. Even textiles such as cotton, woolen or silk or artificial silks are liable to entry tax in states like Karnataka at the rate of 1 % which is adding to purchase cost.
GOODS AND SERVICES TAX
In GST regime, most of the indirect taxes such as Central excise duty, service tax, and VAT / Sales tax and entry tax were subsumed and seamless input tax credit is allowed for the entire supply chain.
The major taxes/levies which were subsumed in the GST regime are: CENTRE TAXES
GST comprises of the following levies:
a. Central Goods and Services Tax (CGST) [also known as Central Tax] on intra-state or intra-union territory of goods or services or both.
b. State Goods and Services Tax (SGST) [also known as State Tax] on intra-state supply of goods or services or both.
c. Union Territory Goods and Services Tax (UTGST) [also known as Union territory Tax] on intra-union territory supply of goods or services or both.
d. Integrated Goods and Services Tax (IGST) [also known as Integrated Tax] on inter-state supply of goods or services or both. In case of import of goods also, the present levy of Countervailing Duty (CVD) and Special Additional Duty (SAD) were replaced by integrated tax.
The taxable event in GST:
The taxable event in GST is supply of goods or services or both. Various taxable events like manufacture, sale, rendering of service, purchase, entry into a territory of state etc. have been done away with in favour of just one event i.e. supply.
The constitution defines “Goods and Services Tax” as any tax on supply of goods, or services or both, except for taxes on the supply of the alcoholic liquor for human consumption.
Supply of Goods or Services or Both Goods as well as services have been defined in the CGST, Act, 2017.
(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
Schedule II to the CGST Act, 2017 lists a few activities which are to be treated as supply of goods or supply of services.
For example, any transfer of title in goods would be a supply of goods, whereas any transfer of right in goods without transfer of title would be considered as services. Also any treatment or process which is applied to another person’s goods is a supply of services.
Further Schedule III to the CGST Act, 2017 spells out activities which shall be treated as neither supply of goods nor supply of services or outside the scope of GST.
Under the above legal provisions the impact of GST on Textile Sector is summarized as under.
The textile sector consisting of the following major sub-sectors.
1. Fibres to Yarn
2. Fabric and
Various supply chains in Textile Sector
1. Fibres- Cotton to Yarn
|Sr No||Supply type||Levy of GST|
|1||Unprocessed Cotton supplied to Ginning mill||GST Exempted|
|2||Ginning Mill to Spinning Mill-||GST Exempted|
|3||Spinning Mill to yarn trader! Weavers etc.,||Attract GST as supply of Goods|
|4||Spinning Mill to Job work ( Cop stage to Reeling, Cone winding, Doubling Etc.,)||Attract GST as supply of Service|
2.Yarn to Grey /Processed Fabric (Woven/Knitted etc.,)
|Sr. No||Supply type||Levy of GST|
|1||Yarn from Weavers! Mills to Sizing Mill on Job work basis||Attract GST as supply of Service|
|2||Yarn Weavers! Mills on to Weaving ! Knitting on Job work basis||Attract GST as supply of Service|
|3||Sale of gray fabric to
|Attract GST as supply of Good|
3.Grey Fabrics to Processed Fabric/Garment/
|Sr. No||Supply type||Levy of GST|
|1||Unprocessed sent for various processing such as Bleaching, Dying, Printing, Calendaring, etc., on Job work basis||Attract GST as supply of Services|
|2||Sale of processed / Knitted fabrics||Attract GST as goods|
4. Garment to Consumer
|Sr No||Supply type||Levy of GST|
|1||Processed fabrics/ Knitted sent for Tailoring Units and other stitching related process etc., on Job work basis||Attract GST as supply of Services|
|2||Sale of garments to
|Attract GST as goods|
Some important definitions is given in Annexure-I
GST being a tax on the event of “supply”, every supplier needs to get registered. However, small businesses having all India aggregate turnover below Rupees 20 lakh (10 lakh if business is in Assam, Arunachal Pradesh, J&K, Himachal Pradesh, Uttarakhand, Manipur, Mizoram, Sikkim, Meghalaya, Nagaland or Tripura) need not register. The small businesses, having turnover below the threshold limit can, however, voluntarily opt to register.
The aggregate turnover includes supplies made by him on behalf of his principals, but excludes the value of job-worked goods if he is a job worker. But persons who are engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax or an agriculturist, to the extent of supply of produce out of cultivation of land are not liable to register under GST.
It should be noted that GST in India is State-centric. Hence, a person making supplies from different States needs to take separate registration in each State. Further, the person may take more than one registration within a State if the person has multiple business verticals. A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of GST. Hence, a supply between these entities constitutes supply under GST.
The supply chain in the Textile Sector is as under:
Supply through Branch Transfer under GST
A Branch in common sense is a location, other than the main office, where business is conducted. In VAT Regime, Branch Transfer against F Form. No such form in GST Regime and the supply is regulated under the concept concept of Distinct Person
As per Schedule I – Branch Transfer even if without consideration to be treated as Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:
As per Section 25(4) A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.
Supply of goods made through an agent
As per Schedule I supply of goods to Agent without consideration is treated as Supply
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
As per Section 24 persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise is required to take registration.
In view of the above GST has to be payable for the supply though Branch and Consignment Agent even though no consideration is received. Since one state one registration, GST is not payable if supply to Intra-State Brach.
RATE OF GST
After GST, the average tax rate for Textile Sector is around 5 %. Minimum is Zero and maximum rate is 18%. The rates for various chapter is given in the Annexure-II
|SrNo||Goods / Service||GST Rate|
|1||Cotton yarn, cotton fabrics, Knitted or crocheted fabrics||5% (2.5%+2.5%)|
|2||Articles of apparel and clothing accessories, knitted or crocheted, of sale value not exceeding Rs. 1000 per piece||5% (2.5%+2.5%)|
|3||Articles of apparel and clothing accessories, knitted or crocheted, of sale value exceeding Rs. 1000 per piece||12% (6 %+6%)|
|4||Yarn of manmade staple fibres||18% (9%+9%)|
|5||Job work||5% (2.5%+2.5%)|
Composition levy under GST
The composition levy is an alternative method of levy of tax designed for small taxpayers whose turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States) The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying tax at normal rate.
|S. No.||Category of Registered person||Rate of Tax|
|1||Manufacturers, other than manufacturers of such goods as may be notified by the Government (Ice cream, Pan Masala, Tobacco products etc.)||2% ( 1% Central tax Plus 1% State tax) of the turnover|
|2||Restaurant Services||5% ( 2.5% Central tax plus 2.5% SGST) of the turnover|
|3||Traders or any other supplier eligible for composition levy||1% ( 0.5% Central tax plus 0.50% State tax ) of the turnover|
Under GST law, taxable value is the transaction value i.e. price actually paid or payable, provided the supplier & the recipient are not related and price is the sole consideration. In most of the cases of regular normal trade, the invoice value will be the taxable value. However, to determine value of certain specific transactions, Determination of Value of Supply rules have been prescribed in CGST Rules, 2017.
Any taxes, fees, charges levied under any law other than GST law, expenses incurred by the recipient on behalf of the supplier, incidental expenses like commission & packing incurred by the supplier, interest or late fees or penalty for delayed payment and direct subsidies (except government subsidies) are required to be added to the price (if not already added) to arrive at the taxable value.
Exclusion of discounts
Discounts like trade discount, quantity discount etc. are part of the normal trade and commerce. Therefore, pre-supply discounts i.e. discounts recorded in the invoice have been allowed to be excluded while determining the taxable value.
Discounts provided after the supply can also be excluded while determining the taxable value, provided two conditions are met, namely:
(a) Discount is established in terms of a pre supply agreement between the supplier & the recipient and such discount is linked to relevant invoices
(b) Input tax credit attributable to the discounts is reversed by the recipient
INPUT TAX CREDIT
Input tax credit on inputs and input services and Capital goods are provided for the complete supply chain. It is to be noted that materials such as chemicals, dyes, accessories and packing materials which constitutes major material cost is eligible as input tax credit when output GST is paid. The availability of seamless credit could also result in lower price of goods which could boost demand for Textile Sector. The rates for certain Inputs and Capital goods is Given in Annexure III
Some of the technical aspects of the scheme of Input Tax Credit are as under:
A. Any registered person can avail credit of tax paid on the inward supply of goods or services or both, which is used or intended to be used in the course or furtherance of business.
B. The pre-requisites for availing credit by registered person are:
i. He is in possession of tax invoice or any other specified tax paying document.
ii. He has received the goods or services. “Bill to ship” scenarios also included.
iii. Tax is actually paid by the supplier.
iv. He has furnished the return.
v. If the inputs are received in lots, he will be eligible to avail the credit only when the last lot of the inputs is received.
vi. He should pay the supplier, the value of the goods or services along with the tax within 180 days from the date of issue of invoice, failing which the amount of credit availed by the recipient would be added to his output tax liability, with interest [rule 2(1) & (2) of ITC Rules]. However, once the amount is paid, the recipient will be entitled to avail the credit again. Incase part payment has been made, proportionate credit would be
C. Documents on the basis of which credit can be availed are:
i. Invoice issued by a supplier of goods or services or both
ii. Invoice issued by recipient along with proof of payment of tax
iii. A debit note issued by supplier
iv. Bill of entry or similar document prescribed under Customs Act
v. Revised invoice
vi. Document issued by Input Service Distributor
D. The Input Service Distributor (ISD) may distribute the credit available for distribution in the same month in which, it is availed. The credit of CGST, SGST, UTGST and IGST shall be distributed as per the provisions of Rule 4(1) (d) of ITC Rules. ISD shall issue invoice in accordance with the provisions made under Rule 9(1) of Invoice Rules.
E. ITC is not available in some cases as mentioned in section1 7 (5) of CGST Act, 2017. Some of them are as follows:
a. motor vehicles and other conveyances except under specified circumstances.
b. goods and/or services provided in relation to:
i. Food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, except under specified circumstances;
ii. Membership of a club, health and fitness center;
iii. Rent-a-cab, life insurance, health insurance except where it is obligatory for an employer under any law;
iv. Travel benefits extended to employees on vacation such as leave or home travel concession
How is Input Tax Credit Used?
ITC on account of CGST
It should first be used to pay CGST.
Then, any remaining amount should be used to pay IGST.
Note that you cannot use ITC of CGST to pay SGST.
ITC on account of SGST
It should be used to pay SGST first.
Then, any remaining amount should be used to pay IGST.
Note that you cannot use ITC of SGST to pay CGST.
ITC on account of IGST
It should be used to pay IGST first.
Then, any remaining amount should be used to pay CGST.
The last priority should be given to payment of SGST.
The provisions pertaining to refund contained in the GST law aim to streamline and standardize the refund procedures under GST regime. Thus, under the GST regime, there will be a standardized form for making any claim for refunds. The claim and sanctioning procedure will be completely online and time bound, which is a marked departure from the existing time consuming and cumbersome procedure.
Situations Leading to Refund Claims:
A claim for refund may arise on account of:
i. Export of goods or services
ii. Supplies to SEZs units and developers
iii. Deemed exports
iv. Refund of taxes on purchase made by UN or embassies etc.
v. Refund arising on account of judgment, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court
vi. Refund of accumulated Input Tax Credit on account of inverted duty structure
vii. Finalisation of provisional assessment
viii. Refund of pre-deposit
ix. Excess payment due to mistake
x. Refunds to International tourists of GST paid on goods in India and carried abroad at the time of their departure from India
xi. Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods or services have not been supplied
xii. Refund of CGST & SGST paid by treating the supply as intra- State supply which is subsequently held as inter-State supply and vice versa
Thus, practically every situation is covered.
Payment of Wrong Tax
Under GST it might happen that the taxable person may pay integrated tax instead of Central tax plus State Tax and vice versa because of incorrect application of the place of supply provisions. In such cases, while making the appropriate payment of tax, interest will not be charged and the refund claim of the wrong tax paid earlier will be entertained without subjecting it to the provision of unjust enrichment.
The refund claim, wherever due, will be directly credited to the bank account of the applicant. The applicant need not come to the authorities to collect the cheque or for any other issues relating to the refund claim.
JOB WORK & TEXTILE SECTOR
Major production process in the Textile sector is through job work only.
During the excise regime certain above processes were treated as manufacture and levy is made on the entire value including the material value.
Now in the GST, the treatment of Job-work is completely changed. As per Section 2(68) of the CGST Act, 2017 defines job-work as under:
(68) “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly;
As per Section 7 of the Act, supply” includes
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) Import of services for a consideration whether or not in the course or furtherance of business;
(c) The activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) The activities to be treated as supply of goods or supply of services
as referred to in Schedule II.
As per Schedule II of CGST Act, 2017, Treatment or process any treatment or process which is applied to another person’s goods is a supply of services. The ownership of the goods does not transfer to the job-worker but it rests with the principal. Thus Job work is a service.
In view of the above facts the “job worker is required to obtain registration”, if his aggregate turnover exceeds the prescribed threshold and follow the various procedure as per the provisions of CGST Act, 2017 and rules made thereunder:
Value for the purpose of payment of GST on Job work:
As per the provisions of Section 15 of CGST Act, 2017, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
As per Explanation (ii) to Section 22, of CGST, Act, 2017 the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
Explanation.––For the purposes of this section,––
(i) The expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
The value of goods after completion of job work is not includible in the turnover of the job-worker. It will be treated as supply of goods by the principal and will accordingly be includible in the turnover of the Principal.
Rate of GST for Job work:
Notification No: 11/2017 Central (Rate) dated 28/06/2017 prescribes the rate of CGST for various services. As per this notification rate prescribed for job work for the textile sectors is as under:
|Chapter, Section or Heading||Description of Service||Rate of CGST|
(Manufacturing services on physical inputs (goods) owned by others)
|(i) Services by way of job work in relation to-
(b) Textile yarns (other than of man-made fibres) and textile fabrics;
Procedural aspects for the movement of goods from Principal to Job-worker:
In GST regime, the principal would get the option of sending inputs or capital goods for job work. Raw materials sent to be received back within 1 year and capital goods to be received back within 3 years. If the goods are not received within this time limit, then supply of goods would be treated as supply for levy of GST. The processed goods could also be sent directly to customers of principal, provided job workers are registered or the details of job workers place are added as additional place of business in principal’s registration certificate.
a. A registered person (Principal) can send inputs! capital goods under intimation and subject to certain conditions without payment of tax to a job-worker and from there to another job-worker and after completion of job-work bring back such goods without payment of tax. The principal is not required to reverse the ITC availed on inputs or capital goods dispatched to job-worker.
b. Principal can send inputs or capital goods directly to the job-worker without bringing them to his premises and can still avail the credit of tax paid on such inputs or capital goods.
C. However, inputs and!or capital goods sent to a job-worker are required to be returned to the principal within 1 year and 3 years, respectively, from the date of sending such goods to the job-worker.
d. After processing of goods, the job-worker may clear the goods to-
i. Another job-worker for further processing
ii. Dispatch the goods to any of the place of business of the principal without payment of tax
iii. Remove the goods on payment of tax within India or without payment of tax for export outside India on fulfilment of conditions.
(e) The facility of supply of goods by the principal to the third party directly from the premises of the job-worker on payment of tax in India and likewise with or without payment of tax for export may be availed by the principal on declaring premise of the job-worker as his additional place of business in registration. In case the job-worker is a registered person under GST, even declaring the premises of the job-worker as additional place of business is not required.
(f) Before supply of goods to the job-worker, the principal would be required to intimate the Jurisdictional Officer containing the details of the description of inputs intended to be sent by the principal and the nature of processing to be carried out by the job-worker. The said intimation shall also contain the details of the other job-workers, if any.
(g) The inputs or capital goods shall be sent to the job-worker under the cover of a challan issued by the principal. The challan shall be issued even for the inputs or capital goods sent directly to the job-worker. The challan shall contain the details specified in Rule 10 of the Invoice Rules.
(h) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
(i) The waste and scrap generated during the job work can be supplied by the job worker directly from his place of business, on payment of tax, if he is If he is not registered, the same would be supplied by the principal on payment of tax.
EXPORT OF TEXTILE PRODUCTS
In the GST regime, the governing provisions related to exports are contained in section 16 of the Integrated Goods and Service Tax Act, 2017 (IGST Act). Supplies of goods and services for exports have been categorized as ‘Zero Rated Supply’ implying that goods could be exported under bond or Letter of Undertaking without payment of integrated tax followed by claim of refund of unutilized input tax credit or on payment of integrated tax with provision for refund of the tax paid.
A. Procedure of Export
1. Any person making zero rated supply (i.e. any exporter) shall be eligible to claim refund under either of the following options, namely: –
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilized input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 (Refunds) of the Central Goods and Services Tax Act or the rules made there under (i.e.) the Central Goods and Service Tax Rules, 2017).
2. For the option (a) above, procedure to file refund has been outlined in the Central Goods and Service Tax Rules, 2017. The exporter claiming refund of unutilized input tax credit will file an application electronically through the Common Portal, either directly or through a Facilitation Centre notified by the GST Commissioner. The application shall be accompanied by documents as prescribed in the said rules. Application for refund shall be filed only after the export manifest or an export report, as the case may be, is delivered under section 41 of the Customs Act, 1962 in respect of such goods. The formats for furnishing bond or LUT for export of goods have been separately notified under COST Rules, 2017.
3. For the option (b), broadly the procedure is that a registered person shall not be required to file any application for refund of integrated goods and services tax paid on supply of goods for exports. The shipping bill, having inter-alia GST invoice details, filed by an exporter shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export and the applicant has furnished a valid return in FORM GSTR-3. The details of the relevant export invoices contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the Customs system and the said system shall in turn electronically transmit back to the common portal a confirmation that the goods covered by the said invoices have been exported out of India. Upon receipt of information regarding furnishing of valid return in FORM GSTR-3 from the common portal, the Customs system shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars. Government has allowed a grace period to the registrants to file returns under the new GST Law. Therefore, this refund procedure shall as a consequence come into operation only when the registrants file the above mentioned returns. Further, the exporters are free to avail option (a) or option (b). The refund shall be governed by the provisions of the section 16 of the IGST Act. , 2017
In GST regime, duty drawback may lose relevance as there would be seamless credit at each stage of value addition and better transparency. Even if duty drawback is continued to offset the impact of basic customs duty component, which is non-creditable tax, the drawback rate could be very less. This could impact largely, those assesses who are dependent on duty drawbacks for achieving good margin / profit.
No amendments have been made to the drawback provisions (Section 74 or Section 75) under Customs Act 1962 in the GST regime. Hence, the drawback scheme will continue in terms of both section 74 and section 75. Option of All Industry Rate (AIR) as well as Brand Rate under Section 75 shall also continue.
Drawback under Section 74 will refund Customs duties as well as Integrated Tax and Compensation Cess paid on imported goods which are re-exported.
At present Duty Drawback Scheme under Section 75 neutralises Customs duty, Central excise duty and Service Tax chargeable on any imported materials or excisable materials used or taxable services used as input services in the manufacture of export goods. Under GST regime, Drawback under Section 75 shall be limited to Customs duties on imported inputs and Central Excise duty on items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) used as inputs or fuel for captive power generation.
A transition period of three months is also being provided from date of implementation of GST i.e. 1.7.2017. During this period, existing duty drawback scheme under Section 75 shall continue. For exports during this period, exporters can claim higher rate of duty drawback (composite AIR) subject to conditions that no input tax credit of CGST/IGST is claimed, no refund of IGST paid on export goods is claimed and no CENVAT credit is carried forward. A declaration from exporter and certificate from jurisdictional GST officer in this regard has been prescribed in the notification related to AIRs. This will prevent double availment of neutralization of input taxes. Similarly, the exporter can claim brand rate for Customs, Central Excise duties and Service Tax during this period.
Exporters also have the option of claiming only the Customs portion of AIR and claim refund/ITC under GST laws. All Industry Rates for the transition period shall be notified in due course of time.
Some important definitions:
(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;
(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes Central tax, State tax, Union territory tax, integrated tax and cess;
(7) “agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family;
(18) “business vertical” means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals.
Explanation.––For the purposes of this clause, factors that should be considered in determining whether goods or services are related include––
(a) the nature of the goods or services;
(b) the nature of the production processes;
(c) the type or class of customers for the goods or services;
(d) the methods used to distribute the goods or supply of services; and
(e) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities;
(42) “Drawback” in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods;
(68) “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly;
(72) “manufacture” means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly;
(88) “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both;
(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;
CGST, SGST and IGST Rate for Textile Sector
|Sr. No||Schedule as per
|Description of Goods||CGST RATE||SGST||IGST|
|3||SCH||5303||Jute fibres, raw or processed but not spun||0.00%||0.00%||0.00%|
|4||SCH||5305||Coconut, coir fibre||0.00%||0.00%||0.00%|
|5||SCH||63||Indian National Flag||0.00%||0.00%||0.00%|
|6||SCH-I||5201 to 5203||Cotton and Cotton waste||2.50%||2.50%||5.00%|
|7||SCH-I||5204||Cotton sewing thread, whether or not put up for retail sale||2.50%||2.50%||5.00%|
|8||SCH-I||5205 to 5207||Cotton yarn [other than khadi yarn]||2.50%||2.50%||5.00%|
|9||SCH-I||5208 to 5212||Woven fabrics of cotton||2.50%||2.50%||5.00%|
|10||SCH-I||5301||All goods i.e. flax, raw or processed but not spun; flax tow and waste (including yarn waste and garneted stock)||2.50%||2.50%||5.00%|
|11||SCH-I||5302||True hemp (Cannabis sativa L), raw or processed but not spun; tow and waste of true hemp (including yarn waste and garneted stock)||2.50%||2.50%||5.00%|
|12||SCH-I||5303||All goods i.e. textile bast fibres [other than jute fibres, raw or processed but not spun]; tow and waste of these fibres (including yarn waste and garneted stock)||2.50%||2.50%||5.00%|
|13||SCH-I||5305 to 5308||All goods [other than coconut coir fibre] including yarn of flax, jute, other textile bast fibres, other
vegetable textile fibres; paper yarn
|14||SCH-I||5309 to 5311||Woven fabrics of other vegetable textile fibres, paper yarn||2.50%||2.50%||5.00%|
|15||SCH-I||5407, 5408||Woven fabrics of manmade textile materials||2.50%||2.50%||5.00%|
|16||SCH-I||5512 to 5516||Woven fabrics of manmade staple fibres||2.50%||2.50%||5.00%|
|17||SCH-I||5705||Coir mats, matting and floor
|18||SCH-I||5809, 5810||Embroidery or zari articles, that is to say,- imi, zari, kasab, saima, dabka, chumki, gotasitara, naqsi, kora,
glass beads, badla, glzal
|19||SCH-I||60||Knitted or crocheted fabrics [All
|20||SCH-I||61||Articles of apparel and clothing accessories, knitted or crocheted, of sale value not exceeding Rs. 1000 per piece||2.50%||2.50%||5.00%|
|21||SCH-I||62||Articles of apparel and clothing accessories, not knitted or crocheted, of sale value not
exceeding Rs. 1000 per piece
|22||SCH-I||63||Other made up textile articles, sets, worn clothing and worn textile articles and rags, of sale value not exceeding Rs. 1000 per piece||2.50%||2.50%||5.00%|
|23||SCH-II||5601||Wadding of textile materials and articles thereof; such as Absorbent cotton wool||6.00%||6.00%||12.00%|
|24||SCH-II||5602||Felt, whether or not impregnated, coated, covered or laminated||6.00%||6.00%||12.00%|
|25||SCH-II||5603||Nonwovens, whether or not impregnated, coated, covered or laminated||6.00%||6.00%||12.00%|
|26||SCH-II||5604||Rubber thread and cord, textile covered; textile yarn, and strip and the like of heading 5404 or 5405, impregnated, coated, covered or sheathed with rubber or plastics||6.00%||6.00%||12.00%|
|27||SCH-II||5605||the like of heading 5404 or 5405, combined with metal in the form of thread, strip or powder or covered with metal; such as Real zari thread (gold) and silver thread, combined with textile thread), Imitation zari threadMetallised yarn, whether or not gimped, being textile yarn, or strip or||6.00%||6.00%||12.00%|
|28||SCH-II||5606||Gimped yarn, and strip and the like of heading 5404 or 5405, gimped (other than those of heading 5605 and gimped horsehair yarn);
chenille yarn (including flock
|29||SCH-II||5607||Twine, cordage, ropes and cables, whether or not plaited or braided and whether or not impregnated, coated, covered or sheathed with rubber or plastics||6.00%||6.00%||12.00%|
|30||SCH-II||5608||Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials||6.00%||6.00%||12.00%|
|31||SCH-II||5609||Articles of yarn, strip or the like of heading 5404 or 5405, twine,
cordage, rope or cables, not
|32||SCH-II||5701||Carpets and other textile floor coverings, knotted, whether or not made up||6.00%||6.00%||12.00%|
|33||SCH-II||5702||Carpets and other textile floor
coverings, woven, not tufted or
including “Kelem”, “Schumacks”,
“Karamanie” and similar hand-
|34||SCH-II||5703||Carpets and other textile floor coverings, tufted, whether or not made up||6.00%||6.00%||12.00%|
|35||SCH-II||5704||Carpets and other textile floor
coverings, of felt, not tufted or
|36||SCH-II||5705||Other carpets and other textile floor coverings, whether or not made up; such as Mats and mattings including Bath Mats, where cotton
predominates by weight, of
Handloom, Cotton Rugs of
|37||SCH-II||5801||Woven pile fabrics and chenille
fabrics, other than fabrics of
|38||SCH-II||5802||Terry towelling and similar woven terry fabrics, other than narrow
fabrics of heading 5806; tufted textile fabrics, other than products of heading 5703
|39||SCH-II||5803||Gauze, other than narrow fabrics of heading 5806||6.00%||6.00%||12.00%|
|40||SCH-II||5804||Tulles and other net fabrics, not
including woven, knitted or
crocheted fabrics; lace in the
piece, in strips or in motifs, other than fabrics of headings 6002 to 6006
|41||SCH-II||5805||Hand-woven tapestries of the type Gobelins, Flanders, Aubusson, Beauvais and the like, and needle-
worked tapestries (for example, petit point, cross stitch), whether or not made up
|42||SCH-II||5806||Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of warp without weft assembled by means of an adhesive (bolducs)||6.00%||6.00%||12.00%|
|43||SCH-II||5807||Labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered||6.00%||6.00%||12.00%|
|44||SCH-II||5808||Braids in the piece; ornamental
trimmings in the piece, without
crocheted; tassels, pompons and
|45||SCH-II||5809||Woven fabrics of metal thread and woven fabrics of metallised yarn of heading 5605, of a kind used in apparel, as furnishing fabrics or for similar purposes, not elsewhere
specified or included; such as Zari borders [other than Embroidery or zari articles, that is to say,- imi, zari, kasab, saima, dabka, chumki, gota
sitara, naqsi, kora, glass beads,
|46||SCH-II||5810||Embroidery in the piece, in strips or in motifs, Embroidered badges,
motifs and the like [other than Embroidery or zari articles, that is to say,- imi, zari, kasab, saima, dabka,
chumki, gota sitara, naqsi, kora,
|47||SCH-II||5811||Quilted textile products in the piece, composed of one or more layers of textile materials assembled
with padding by stitching or otherwise, other than embroidery of heading 5810
|48||SCH-II||5901||Textile fabrics coated with gum or amylaceous substances, of a kind used for the outer covers of books or the like; tracing cloth; prepared painting canvas; buckram and similar stiffened textile fabrics of a kind used for hat foundations||6.00%||6.00%||12.00%|
|49||SCH-II||5902||Tyre cord fabric of high tenacity yarn of nylon or other polyamides, polyesters or viscose rayon||6.00%||6.00%||12.00%|
|50||SCH-II||5903||Textile fabrics impregnated,
coated, covered or laminated with
|51||SCH-II||5904||Linoleum, whether or not cut to shape; floor coverings consisting of a coating or covering applied on a textile backing, whether or not cut
|52||SCH-II||5905||Textile wall coverings||6.00%||6.00%||12.00%|
|53||SCH-II||5906||Rubberised textile fabrics, other than those of heading 5902||6.00%||6.00%||12.00%|
|54||SCH-II||5907||Textile fabrics otherwise
impregnated, coated or covered;
painted canvas being theatrical
scenery, studio back-cloths or the
|55||SCH-II||5908||Textile wicks, woven, plaited or
knitted , for lamps, stoves, lighters,
candles or the like; incandescent
gas mantles and tubular knitted gas
mantle fabric therefor, whether or
|56||SCH-II||5909||Textile hose piping and similar textile tubing, with or without lining, armour or accessories of other materials||6.00%||6.00%||12.00%|
|57||SCH-II||5910||Transmission or conveyor belts or belting, of textile material, whether or not impregnated, coated, covered or laminated with plastics, or reinforced with metal or other material||6.00%||6.00%||12.00%|
|58||SCH-II||5911||Textile products and articles, for technical uses, specified in Note 7 to this Chapter; such as Textile fabrics, felt and felt-lined woven fabrics, coated, covered or laminated with rubber, leather or other material, of a kind used for card clothing, and similar fabrics of a kind used for other technical purposes, including narrow fabrics made of velvet impregnated with rubber, for covering weaving spindles (weaving beams); Bolting cloth, whether or Not made up; Felt for cotton textile industries, woven;
Woven textiles felt, whether or not impregnated or coated, of a kind commonly used in other machines, Cotton fabrics and articles used in machinery and plant, Jute fabrics and articles used in machinery or plant, Textile fabrics of metalised yarn of a kind commonly used in paper making or other machinery, Straining cloth of a kind used in oil presses or the like, including that of human hair, Paper maker’s felt, woven, Gaskets, washers, polishing discs and other machinery parts of textile articles
|59||SCH-II||61||Articles of apparel and clothing accessories, knitted or crocheted, of sale value exceeding Rs. 1000 per piece||6.00%||6.00%||12.00%|
|60||SCH-II||62||Articles of apparel and clothing accessories, not knitted or crocheted, of sale value exceeding Rs. 1000 per piece||6.00%||6.00%||12.00%|
|61||SCH-II||63||Other made up textile articles, sets, worn clothing and worn textile||6.00%||6.00%||12.00%|
|62||SCH-III||5401||Sewing thread of manmade filaments, whether or not put up for retail sale||9.00%||9.00%||18.00%|
|All synthetic filament yarn such as nylon, polyester, acrylic, etc.||9.00%||9.00%||18.00%|
|All artificial filament yarn such as viscose rayon, Cuprammonium, etc.||9.00%||9.00%||18.00%|
|65||SCH-III||5501, 5502||Synthetic or artificial filament tow||9.00%||9.00%||18.00%|
|66||SCH-III||5503, 5504,5506, 5507||Synthetic or artificial staple fibres||9.00%||9.00%||18.00%|
|67||SCH-III||5505||Waste of manmade fibres||9.00%||9.00%||18.00%|
|68||SCH-III||5508||Sewing thread of manmade staple fibres||9.00%||9.00%||18.00%|
|Yarn of manmade staple fibres||9.00%||9.00%||18.00%|
GST, SGST AND IGT RATES FOR SOME INPUTS AND CAPITAL GOODS
|Sl. No||SCH||Chapter / Heading / Sub-heading / Tariff item||Description of Goods||CGST RATE||SGST RATE||CGST RATE|
|1||SCH-III||3203||Colouring matter of vegetable or animal origin (including dyeing extracts but excluding animal black), whether or not chemically defined; preparations as specified in Note 3 to this Chapter based on colouring matter of vegetable or animal origin||9.00%||9.00%||18%|
|2||SCH-III||3204||Synthetic organic colouring matter, whether or not chemically defined; preparations as specified in Note 3 to this Chapter based on synthetic organic colouring matter; synthetic organic products of a kind used as fluorescent brightening agents or as luminophores, whether or not chemically defined||9.00%||9.00%||18%|
|3||SCH-III||3205||Colour lakes; preparations as specified in Note 3 to this Chapter based on colour lakes||9.00%||9.00%||18%|
|4||SCH-III||3206||Other colouring matter; preparations as specified in Note 3 to this Chapter, other than those of heading 32.03, 32.04 or 32.05; inorganic products of a kind used as luminophores, whether or not chemically defined||9.00%||9.00%||9.00%|
|6||SCH-III||8445||Machines for preparing textile fibres; spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft-winding) machines and machines for preparing textile yarns for use on the machines of heading 8446 or 8447||9.00%||9.00%||18%|
|7||SCH-III||8446||Weaving machines (looms)||9.00%||9.00%||18%|
|8||SCH-III||8447||Knitting machines, stitch-bonding machines and machines for making gimped yarn, tulle, lace, embroidery, trimmings, braid or net and machines for tufting||9.00%||9.00%||18%|
|9||SCH-III||8448||Auxiliary machinery for use with machines of heading 84.44, 84.45,84.46 or 84.47 (for example, dobbies, Jacquards, automatic stop motions, shuttle changing mechanisms); parts and accessories suitable for use solely or principally with the machines of this heading or of heading 8444, 8445,8446 or 8447 (for example, spindles and spindles flyers, card clothing, combs, extruding nipples, shuttles, healds and heald frames, hosiery needles)||9.00%||9.00%||18%|
|10||SCH-III||8449||Machinery for the manufacture or finishing of felt or nonwovens in the piece or in shapes, including machinery for making felt hats; blocks for making hats||9.00%||9.00%||18%|
|11||SCH-III||8451||Machinery (other than machines of heading 8450) for washing, cleaning, wringing, drying, ironing, pressing (including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile yarns, fabrics or made up textile articles and machines for applying the paste to the base fabric or other support used in the manufacture of floor covering such as linoleum; machines for reeling, unreeling, folding, cutting or pinking textile fabrics||9.00%||9.00%||18%|
|12||SCH-III||8482||Ball bearing, Roller Bearings||9.00%||9.00%||18%|