Legal Advice on the Taxation Liabilities for Foreign Direct Investments (FDI) in India-Clothing & Apparel Industry: Best FDI Attorney in India
“Foreign Direct Investment in India or FDI in India is the primary source of investment in India and the Government of India and the State Governments have also come up with several tax advantages and tax benefits for foreign investors. Special tax exemptions is/are given for export oriented industries. urther, special tax benefits are given for mass manufacturing.”
Textile industries contribute significantly to the growth of the Indian economic growth in terms of Gross Domestic Product (GDP), export marketing, employment, and so on. In India, this is one of the earliest industrial industries. It is the second biggest sector, behind agriculture, in terms of job opportunities for both skilled and unskilled workers. The textile industry accounts for more than 10 percent of total exports.
Tax on basis of sectors of Textile Industry
The textile industry is categorized into two: unorganised and organised. Hand-loom, medium and small industries, handicrafts, make up the unorganised sector, while the organised sector includes spinning, garments, and apparel which use sophisticated technology and processes. The textile rate structure has been set at 5% for cotton fibre and 18% for man-made synthetic fiber, respectively. Silk and jute, on the other hand, are completely excluded from the GST. Apparels with a value of less than Rupees thousand will be subject to a 5% GST, while those with a value of more than INR 1000 would be subject to a 12 percent tax.
Types of tax on Textile Sector
Primarily Service Tax and Central Excise Duties, both of which were widely used, are two forms of indirect taxes examined by the government. Textile is exempt from service since it falls within the category of goods. Textile items are largely excluded or taxed at a relatively low rate under the existing taxation regime. Following the repeal of the Additional Excise Duty, state governments must no longer impose sales taxes. Cotton fibre is expected to gain traction as a result of the GST rate set for it, according to the tax rate structure. Overall, the final tariffs are significantly lower than the old plan and will undoubtedly benefit the whole business in the long run.
Complex Tax Structure
In India, the taxes system is complicated and regulated by both the central and state governments. Service tax, excise duty, and customs duty are collected by the Centre, whereas sales tax is collected by the states on all items. The states are also responsible for collecting the central sales tax in case transactions which are interstate. When raw materials and in-process products are moved through state to another, the tax burden might be high. It has a strong and imminent effect on the price of items. The Indian government has recognised this problem and is working to implement the GST, one of the country’s most significant tax reforms, which is a national tax on the manufacturing, sale, and consumption of products and services.
Companies work in the “organised” sector, which means they must adhere to several government labour and tax rules. The majority of businesses, on the other hand, operate in the “unorganised” small-scale sector, where laws are less strict and more readily avoided. The Indian textile industry’s distinctive structure stems from a heritage of tax, labour, and other regulatory regulations that supported small-scale, etc. The framework is also attributable to India’s historical focus on satisfying the requirements of its domestic consumers, who are mostly low-income, rather than the global market.
Although most of the taxation liabilities and/or the details about the tax slabs including the payment towards the direct taxes and indirect taxes are available online on different government portals yet the legal advice of a reputed FDI Attorney in India cannot be ruled out.
The implementation of GST will aid in the registration of an increasing number of traders. Traders will be able to access the export market after registering. Because of the lengthy procedure, businesses are hesitant to export their products. However, under GST, impediments such as duty drawback would be abolished, and ITC will also make exporting easier. Exporters are free from duty under the export marketing capital goods plan if the value of exports is nearly six times the duty value within six years of the export.
Authored By: Adv. Anant Sharma & Afsana Khan