1) Revamp in Input Tax Credit :
Most parts of the Indian textile industry operates under the unorganized sector. It creates a gap in the input tax credit system. If the registered taxpayers buy inputs from the unorganized sector, they can not avail input tax credit facility. GST would enable a balanced input credit system, which would shift the balance towards the organized sector.GST on textile will bring a significant change in the input tax credit system and it will create an important balance between organized and unorganized sectors of the industry. In fact, entire industry would move towards Organized Sector.
2) Reduction in Manufacturing Cost:
GST as a one nation one tax will undermine several taxes like Entry tax, Octroi tax, Luxury tax. As a result, It will lower the manufacturing cost, this will ultimately earn profits to textile manufacturers by contributing to Indian Economy.
3) Input Credit System allowance on Capital Goods:
Presently the importing cost latest technology for manufacturing textile goods is expensive as excise duty paid is not covered under Input Tax Credit. As GST launches the excise duty will have input tax credit facility and it will decrease the total import cost for capital goods.
4) Increase in Textile Market Competition:
GST will restructure the input tax credit claiming process. It will make the entire textile industry more aggressive in the export market. – Prabhu Dhamodharan
Input tax credit will be a changing steps for promoting the exports of textile products. Additionally, It will encourage the manufacturers to adopt cutting-edge production system to develop products and therefore increasing the competition in market.
5) Farmers Encouragement:
As the production rises, demand is tend to shown increase. As a result to meet demand the farmer will increase cotton production which will earn them a good profit. Cotton yarn and fabrics will come under 5% GST tax slab, The farmers will get the accurate price for their hard work.
6) Ready Garments will be expensive:
GST will ensure huge difference in current consumption. The tax will be 12%, while current tax slab is 4-5% VAT+ 2% Excise. The higher tax change will soar the rates of ready-made garments as a result.