Dear User,
According to a report by financial analysis firm ICRA, a 12% (lower rate) recommended by the Dr. Arvind Subramanian Committee is likely to have a negative impact on the textile sector, especially the cotton value chain, which is currently attracting zero central excise duty (under optional route); unlike the man-made fibre sector, where the fibre attracts excise duty at the manufacturing stage (unlike cotton). Hence there is an incentive for the downstream players in manmade sector to avail the Input Credit Tax (ITC).
On the positive side, under GST, textile players which are oriented towards domestic markets will be able to ITC on domestic capital goods (but not the import duty) as their sales will be subject to GST. Accordingly, this will reduce the cost of capital investments and hence will be positive for the players operating in domestic markets.
