Dha...... Gst... Textile

Impact of GST on Textile Sector
A PROJECT ON
STUDY ON IMAPACT OF GST ON TEXTILE

INDUSTRY
MASTER IN MANAGEMENT STUDIES
FINANCE
SEMESTER-III
FOR THE ACADEMIC YEAR 2018-19
Submitted
In Partial Fulfilment of Requirements or the Award of the MASTER IN

MANAGEMENT STUDIES
BY
MS. DHANRAJ SHARMA
Roll No. 1768076
UNDER THE GUIDANCE OF
Mr. NIKESH MUSLONKAR
ASM’s INSTITUTE OF MANAGEMENT & COMPUTER STUDIES

WAGLE ESTATE THANE 400604
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ACKNOWLEDGEMENT
I want to thank the following people for making this project a success. They mean a
lot to me and have bought this project into existence.
Principal Dr. M.S. Raje, to express my deep regards and gratitude to for his
support and facilities provides to me for my project.
Senior Vice Principal Mrs. Kavita Sharma & Vice Principal Mrs. AnjaneekaUday,
for allowing me to frame my talent by allowing me to present my project in front of
you.
Mr. SHRIPAD BAPAT, our course coordinator for providing me constant help and
support while preparing this project.
My projects guide Mr. NIKESH MUSLONKAR, who has given shape to this
project by giving the required guidance to prepare the project as per the requirements of
the university.
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DECLARATION
I am DHANRAJ SHARMA student of MMS Semester III (2018-20197) hereby

declare that I have completed the Project on STUDY OF IMPACT OF GST ON THE
TEXTILE INDDUSTRY.
The information submitted is true and original to the best of my knowledge.
Signature of student
DHANRAJ SHARMA
ROLL NO. 1768076
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COMPANY PROFILE
Name of the company JAI AMBE TEXTILES
Name of the owner Ramjiwan sharma
Name of manager Nemichand Sharma
Establishment 2007
Nature of business Wholesale cloth merchant
Introduction of firm
The3 vision of Mr. Ramjiwan Ramdeo Sharma has led the ‘JAI AMBE
TEXTILES’ towards one of leading and well known cloth merchants in
Ichalkaranji. The key of this success is three years of experience in this
sector and to provide best of products to the clients. In Jai ambe textiles we
buy and sell the grey cotton raw material in which further transport to its
destinies for further process. Grey cotton is booming in Ichalkaranji due to
its suitable atmosphere, the raw material produced in Ichalkaranji is also
exported.We have created abench mark in this sector.
To set a firm is not easy. With just 122 rupees in pocket Mr. ramjiwan
Sharma went to Mumbai to support his family in Rajasthan. He first worked
in Mumbai for 10 years and gained enough knowledge in this sector, further
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he moved to Ichalkaranji in 1988 to ichakaranji to pursue his dreams into

reality.in the beginning he did service for six years and then he became a
broker for 12 years, since then he never looked back. The year came in 2007
when he started his own firm with a small capital of rupees 5 lacs with his
two brothers Babulal Sharma & Nemichand Sharma who played a
significant role in success of Jai ambe textiles.
Further in 2011 Mr. Sharma expands his horizons & established another firm
Nemichand maheshkumar arm of jai ambe textiles J.A Tex & NM are
significant players in their respective markets today and enjoy consumer
loyalty and preference. Today the firm has strong presence in Rajasthan &
Mumbai region. In 2007 The turnover was 2 crores today both jai ambe tex
anD NM enjoy a turnover of 10 crores.
VISION MISSION & PHILOSOPHY
VISION
To become a most trusting and value adding firm in clothsegment of India.
MISSION
In coming future we want to enter in other segments of cloth materials.
Philosophy
At jai ambe textiles we work on formula given by our founder
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“Aapka vyavahar hi tay karega apka vyapaar” which means if your

behaviour towards client an suppliers is loyal your business will we
healthier.
CSR
We at Jai ambe textiles believe in giving back to the society and work for
humanity. J.A Tex carries out various non profit activities which we carry
yearly are providing funds for human hospitals like Seva bharti in
Ichakaranji, kanneri matt hospital Kolhapur, donated funds to narayan seva
sanstha Jaipur which works for physically challenged peoples. We also
promote various festivals like Ganesh chathurthi, navaratri etc. The firm also
provides funds for animal hospital ( Krishna gopal gaushala )
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NO TITLE PAGE.NO
INTRODUCTION 4-7
OBJECTIVE
8
SCOPE
01 LIMITATIONS 9
HISTORY 10-15
02 INDIAN VIEW 16-20
GLOBAL VIEW 21-27
03 CHAPTER 1
MONETARY POLICY 29-33
04 CHAPTER 2
NEED&TYPES FOR MONETARY POLICY 34-39
05 CHAPTER 3
ISSUES IN INDIAN BANKING 40-52
06 CHAPTER 4
FUNCTIONS OF MONETARY POLICY 53-56
07 CHAPTER 5
INSTRUMENTS OF MONETARY POLICY 57-73
08 CHAPTER 6
ROLE OF RBI IN MONETARY POLICY 74-78

ADVANTAGES AND LIMITATIONS
79-84
09 QUESTIONARE 85
QUESTION BANK 86-88
10 RESEARCH METHODOLOGY 89
11 CONCLUSION 91
12 BIBLIOGRAPHY & WEBLIOGRAPHY 92
INDEX
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INTRODUCTION
TEXTILE INDUSTRY IN INDIA
The textile industry in India traditionally, after agriculture, is the only

industry that has generated huge employment for both skilled and unskilled
labour in textiles. The textile industry continues to be the second-largest
employment generating sector in India. It offers direct employment to over
35 million in the country.[1] The share of textiles in total exports was 11.04%
during April–July 2010, as per the Ministry of Textiles. During 2009–2010,
the Indian textile industry was pegged at US$55 billion, 64% of which
services domestic demand.[1] In 2010, there were 2,500 textile weaving
factories and 4,135 textile finishing factories in all of India. [2] According
to AT Kearney’s ‘Retail Apparel Index’, India was ranked as the fourth most
promising market for apparel retailers in 2009.[3]
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India is first in global jute production and shares 63% of the global textile
and garment market. India is second in global textile manufacturing and also
second in silk and cotton production. 100% FDI is allowed via automatic
route in textile sector.
Textile plays a major role in the Indian Economy. It contributes 14 per cent
to industrial production and 4 per cent to GDP. With over 45 million people,
the industry is one of the largest source of employment generation in the
country
The size of India’s textile market as of July 2017 was around US$ 150
billion, which is expected to touch US$ 250 billion market by 2019, growing
at a CAGR of 13.58 per cent between 2009-2019. The central government is
planning to finalise and launch the new textile policy in the next three
months1. The policy aims to achieve US$ 300 billion worth of textile exports
by 2024-25 and create an additional 35 million jobs.
Production of man-made fibre has also been on an upward trend
Production stood at 1.347 million tonnes in FY16 with the figure reinforcing
a recovery from 2009 levels
During FY171, production of man-made fibre in India stood at 1.364 million

tonnes and the production until January 2018 in FY18* has been 1.123
million tonnes
Market Size
The Indian textiles industry, currently estimated at around US$ 120 billion,
is expected to reach US$ 230 billion by 2020. The Indian Textile Industry
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contributes approximately 2 per cent to India’s Gross Domestic Product

(GDP), 10 per cent of manufacturing production and 14 per cent to overall
Index of Industrial Production (IIP).
Indian khadi products sales increased by 33 per cent year-on-year to Rs

2,005 crore (US$ 311.31 million) in 2016-17 and is expected to exceed Rs
5,000 crore (US$ 776.33 million) sales target for 2018-19, as per the Khadi
and Village Industries Commission (KVIC)
The total area under cultivation of cotton in India is expected to increase by

7 per cent to 11.3 million hectares in 2017-18, on account of expectations of
better returns from rising prices and improved crop yields during the year
2016-17.
Indian exports of locally made retail and lifestyle products grew at a

compound annual growth rate (CAGR) of 10 per cent from 2013 to 2016,
mainly led by bedding bath and home decor products and textiles#. The
Government of India targets textile and garment sector exports at US$ 45
billion for 2017-18.
Investment
The textiles sector has witnessed a spurt in investment during the last five
years. The industry (including dyed and printed) attracted Foreign Direct
Investment (FDI) worth US$ 2.55 billion during April 2000 to June 2017.
Some of the major investments in the Indian textiles industry are as follows:
Future Group is planning to open 80 new stores under its affordable fashion
format, Fashion at Big Bazaar (FBB), and is targeting sales of 230 million
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units of garments by March 2018, which is expected to grow to 800 million

units by 2021.
Raymond has partnered with Khadi and Village Industries Commission

(KVIC) to sell Khadi-marked readymade garments and fabric in KVIC and
Raymond outlets across India.
Max Fashion, a part of Dubai based Landmark Group, plans to expand its
sales network to 400 stores in 120 cities by investing Rs 400 crore (US$ 60
million) in the next 4 years.
Government Initiatives
The Indian government has come up with a number of export promotion

policies for the textiles sector. It has also allowed 100 per cent FDI in the
Indian textiles sector under the automatic route.
Initiative will be taken into consideration by Government of India.
The Government has planned to connect as many as 5 crore (50 million)

village women to charkha (spinning wheel) in next 5 years with a view to
provide them employment and promote khadi and also, they inaugurated 60
khadi outlets which were renovated and re-launched during the completion
of KVIC s 60th anniversary and a khadi outlet.
The Textiles Ministry will organise 'Hastkala Sahyog Shivirs' in 421 handloom-
handicrafts clusters across the country which will benefit over 1.2 lacs weavers and
artisans. The Gujarat government's decision to extend its textile policy by a year is set.
It is believes to attract Rs 5,000 cr. (US$ 50 billion) of more investment in sectors
across the value chain. The government estimates addition till now of a million units of
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spindle capacity in the spinning sector and setting up of over 1,000 units in technical
textiles.
TECHNOLOGY UP-GRADATIONFUND SCHEME-TEXTILE SECTOR(TUFS)
The purpose of these scheme is upgrade & modernize the Indian Textile Industry by
encouraging it to undertake & adopt modern technological process & or undertake
capacity expansion.
Scope of the Scheme
TUFS benefit is available for TUFS benchmarked machinery covering the following
activities
a. Cotton ginning and pressing.
b. Silk reeling and twisting.
c. Wool scouring, combing and carpet industry.
d. Synthetic filament yarn texturising, crimping and twisting.
e. Spinning.
f. Viscose Staple Fibre (VSF) and Viscose Filament Yarn (VFY).
g. Weaving, knitting and fabric embroidery
h. Technical textiles including non-wovens.
i. Garment / design studio / made-up manufacturing
j. Processing of fibres, yarns, fabrics, garments and made-ups.
k. Production activities of Jute Industry.
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OBJECTIVES
1. To know & understand the market of textile industry.
2. To know & understand the sector after the introduction of GST.
3. To know about the implications after the introduction of GST.
4. To know & understand the scope of textile products.
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LIMITATIONS
1. The project was time consuming.
2. The study is limited to manufacturing sector only.
3. The study of GST only has view as per the industry in which I have worked
and does not provide information about the overall economy.
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HISTORY
There are some indications that weaving was already known in
the Palaeolithic. An indistinct textile impression has been found at Pavlov,
Moravia. Neolithic textiles were found in pile dwellings excavations in
Switzerland and at Egypt at a site which dates to about 5000 BC.
In Roman times, wool, linen and leather clothed the European population,
and silk, imported along the Silk Road from China, was an extravagant
luxury. The use of flax fibre in the manufacturing of cloth in Northern
Europe dates back to Neolithic times.
During the late medieval period, cotton began to be imported into

northern Europe. Without any knowledge of what it came from, other than
that it was a plant, noting its similarities to wool, people in the region could
only imagine that cotton must be produced by plant-borne sheep. John
Mandeville, writing in 1350, stated as fact the now-preposterous belief:
"There grew in India a wonderful tree which bore tiny lambs on the endes of
its branches. These branches were so pliable that they bent down to allow the
lambs to feed when they are hungry." This aspect is retained in the name for
cotton in many European languages, such as German Baumwolle, which
translates as "tree wool". By the end of the 16th century, cotton was
cultivated throughout the warmer regions of Asia and the Americas.
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The main steps in the production of cloth are producing the fibre, preparing
it, converting it to yarn, converting yarn to cloth, and then finishing the
cloth. The cloth is then taken to the manufacturer of garments. The
preparation of the fibres differs the most, depending on the fibre used. Flax
requires retting and dressing, while wool requires carding and washing.
The spinning and weaving processes are very similar between fibres,
however.
Spinning evolved from twisting the fibres by hand, to using a drop spindle,
to using a spinning wheel. Spindles or parts of them have been found in
archaeological sites and may represent one of the first pieces of technology
available. They were invented in the Indian subcontinent between 500 and
1000 AD. The key British industry at the beginning of the 18th century was
the production of textiles made with wool from the large sheep-farming
areas in the Midlands and across the country (created as a result of land-
clearance and enclosure). This was a labour-intensive activity providing
employment throughout Britain, with major centres being the West
Country; Norwich and environs; and the West Riding of Yorkshire. The
export trade in woolen goods accounted for more than a quarter of British
exports during most of the 18th century, doubling between 1701 and 1770.
Exports by the cotton industry – centered in Lancashire – had grown tenfold

during this time, but still accounted for only a tenth of the value of the
woolen trade. Before the 17th century, the manufacture of goods was
performed on a limited scale by individual workers, usually on their own
premises (such as weavers' cottages). Goods were transported around the
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country by clothiers who visited the village with their trains of packhorses.
Some of the cloth was made into clothes for people living in the same area,
and a large amount of cloth was exported. River navigations were
constructed, and some contour-following canals. In the early 18th century,
artisans were inventing ways to become more productive. Silk, wool, fustian,
and linen were being eclipsed by cotton, which was becoming the most
important textile. This set the foundations for the changes.
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Industrial revolution
TEXTILE INDUSTRY BEFORE INDEPENDENCE
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The two world War and the Swadeshi movement provided great stimulus to
the Indian cotton textile industry. However, during the period 1922 to 1937
the industry was in doldrums and during this period a number of the Bombay
mills changed hands. The second World War, during which textile import
from Japan completely stopped, however, brought about an unprecedented
growth of this industry. The number of mills increased from 178 with 4.05
lakh looms in 1901 to 249 mills with 13.35 lakh looms in 1921 and further to
396 mills with over 20 lakh looms in 1941. By 1945 there were 417 mills
employing5.10lakhworkers.
The cotton textile industry is rightly described as a Swadeshi industry

because it was developed with indigenous entrepreneurship and capital and
in the pre-independence era the Swadeshi movement stimulated demand for
Indian textile in the country.
The partition of the country at the time of independence affected the cotton
textile industry also. The Indian union got 409 out of the 423 textiles mills of
the undivided India. 14 mills and 22 per cent of the land under cotton
cultivation went to Pakistan. Some mills were closed down for some time.
For a number of years since independence, Indian mills had to import cotton
from Pakistan and other countries.
After independence, the cotton textile industry made rapid strides under the
Plans. Between 1951 and 1982 the total number of spindles doubled from 11
million to 22 million. It increased further to well over 26 million by 1989-90.
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TEXTILE INDUSTRY AFTER INDEPENDENCE
Textile constitutes the single largest industry in India. The segment of the
industry during the year 2000-01 has been positive. The production of cotton
declined from 156 lakh bales in 1999-2000 to 1.40 lakh bales during 2000-
01. Production of man-made fibre increased from 835 million kgs in 1999-
2000 to 904 million kgs during the year 2000-01 registering a growth of
8.26%. The production of spun yarn increased to 3160 million kgs during
2000-01 from 3046 million kgs during 1999-2000 registering a growth of
3.7%. The production of man-made filament yarn registered a growth of
2.91% during the year 1999-2000 increasing from 894 million kgs to 920
million kgs. The production of fabric registered a growth of 2.7% during the
year 1999-2000 increasing from 39,208 million sq mtrs to 40,256 million sq
mtrs. The production of mill sector declined by 2.6% while production of
handloom, powerloom and hosiery sector increased by 2%, 2.7% and 5.1%
respectively. The exports of textiles and garments increased from Rs.
455048 million to Rs. 552424 million, registering a growth of 21%. Growth
in the textile industry in the year 2003-2004 was Rs. 1609 billion. And
during 2004-05 production of fabrics touched a peak of 45,378 million squre
meters. In the year 2005-06 up to November, production of fabrics registered
a further growth of 9 percent over the corresponding period of the previous
year.
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LITERATURE REVIEW
CHAPTER 1 INTRODUCTION TO GST
The Goods & Services Tax (GST) is a Canadian value added tax levied on
most of goods and services sold for domestic consumption. In India this tax
is levied to abolish the multiple indirect taxes in the economy.
GST Is levied on
a) Manufacturers
b) Retailers
c) Consumers
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The union Finance Minister Arun Jaitley is the chairman of the GST council.
Introduction of GST in India is one of the biggest fiscal and economic
reforms since independence, is inching close to its implementation with the
receipt of presidential assent.
GST is considered as an indirect tax for the whole nation that would make
India one unified common market. It is a tax which is imposed on the sale,
manufacturing and the usage of the goods and services. It is a single tax that
is imposed on the supply of the goods and services, right from the
manufacturer to the customer. The credits of the input taxes that are paid at
each stage will be available in the subsequent stage of value addition which
makes GST essentially a tax only on the value addition on each stage. The
final consumers will bear only the tax charged by the last dealer in the
supply chain with the set of benefits that are at all the previous stages.
It is charged at the national and state level at similar rates for the same
products and it also replaces almost all the current indirect taxes that are
imposed separately by the Centre and the States. Goods & Services Tax is
a destination based tax which means that the tax is paid at the place of
supply.
The proposed bill which seeks further to amend the constitution provides for
 CGST ( central Goods and sevices tax)

 SGST ( state goods and services tax)
 IGST ( Integrated goods& services tax)
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CHAPTER 2 TYPES OF TEXTILES
Textiles are classified according to their component fibres into silk, wool,
linen, cotton, such synthetic fibre as rayon, nylon, and polyesters, and some
inorganic fibres, such as cloth of gold, glass fibre, and asbestos cloth. They
are also classified as to their structure or weave, according to the manner in
which warp and weft cross each other in the loom (see loom ; weaving ).
Value or quality in textiles depends on several factors, such as the quality of
the raw material used and the character of the yarn spun from the fibers,
whether clean, smooth, fine, or coarse and whether hard, soft, or medium
twisted. Density of weave and finishing processes are also important
elements in determining the quality of fabrics.
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Tapestry , sometimes classed as embroidery, is a modified form of plain

cloth weaving. The weaving of carpet and rugs is a special branch of the
textile industry. Other specially prepared fabrics not woven are felt and bark
(or tapa) cloth, which are beaten or matted together, and a few in which a
single thread is looped or plaited, as in crochet and netting work and various
laces. Most textiles are now produced in factories, with highly specialized
power looms, but many of the finest velvets, brocades, and table linens are
still made by hand.
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CHAPTER 2 FEATURES OF GST

The salient features of GST are given below:
1. Dual GST:
Dual GST signifies that GST will be levied by both, the Central Government
and the State, on supply of goods or services. Under the Constitution,
presently the taxing powers are presently split between the State and the
Centre. In case of certain transactions, the power to tax is vested with the
Centre and while in certain others, the power is vested with the State. Under
GST, the power to tax on supply of all goods and services will be vested in
the hands of both, the State and the Centre. In certain cases, such as the
interstate transactions, the power to tax will be vested with the Central
Government, while the revenue will in some appropriate manner, get
distributed to the States. Considering the dual taxation power to tax
transactions under GST, the structure is referred to as Dual GST.
Considering the basic framework of the constitution and keeping its structure
intact, Dual GST appears to be implementable solution for India scenario.
2. Subsuming all Taxes:
GST should subsume all major indirect taxes levied by the Central
Government i.e. central excise,customs and service tax and majority of the
taxes levied by the State Government i.e. VAT, luxury tax, entertainment
tax, etc. In this regard, tax on petroleum products and alcohol are intended
to be kept either outside or tax additionally under GST.
Rate Structure:
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It is expected that GST will be levied on the transaction value i.e. price
actually paid or payable for supply of goods and services. The GST for local
supplies will be split into SGST and CGST. The Task Force on GST of
Thirteenth Finance Commission (TFC) has worked out a Revenue-Neutral
Rate (RNR) of 12% (5% CGST and 7% SGST) assuming there is a single
GST rate and stamp duty & electricity duty are also subsumed in the
GST. GST would have a 4 rate structure with standard rate, concessional
rate, special rate for bullion & jewellery and exempted/ nil rated. It is not
clear whether services and goods will have the same rate or be subjected to
tax at different rates. Further, the Government is yet to specify the rate of
taxes proposed for each of these categoies
4. Credit Scheme:
GST will be levied on supply of goods and services and the supplier will be
allowed credit for the GST paid on purchases. The credit would be seamless
except that the credit of CGST paid will not be allowed for set-off against
SGST payable and vice versa.
5. IGST:
Under this model the Centre will levy the IGST which will be CGST plus
SGST on all inter-State transactions of taxable goods and services. Inter-
State seller would pay the IGST on value addition after adjusting of IGST,
CGST and SGST on purchases. The Exporting state will transfer to the
Centre the credit of SGST used on payment of IGST.
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6. Administrative Mechanism:
Both the Central Government and State Government will have the authority
and control over the assessee as follows. (i) The administration of the
Central GST would be with the Centre and for State GST with the States.
(ii) Each taxpayer could be allotted a PAN linked taxpayer identification
number with a total of 13/15 digits. This would bring the GST PAN-linked
system in line with the prevailing PAN-based system for Income
tax facilitating data exchange and taxpayer compliance. The exact design
would be worked out in consultation with the Income-Tax Department.
(iii) Keeping in mind the need of tax payers convenience, functions such as
assessment, enforcement, scrutiny and audit would be undertaken by the
authority which is collecting the tax, with information sharing between the
Centre and the States.
(iv) Accordingly, the assessee dealer would be required to pay GST into the
specified account of the State/ Centre and file periodic returns separately
with the State/ Central Government.
CHAPTER 3 GST RATES IN INDIA 2017

The GST Council has proposed a four-tier structure wherein rates are either
nil or very low so far as essential food items are concerned. The reason for
this is that there food items constitute around 50%of the consume basket,
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and contribution significantly towards ensuring that widespread inflation is

kept in check every after the revised tax slabs under GST have been
implemented. Negative items and luxury goods, however, it is expected to be
taxed at considerably higher rate in order to maintain revenue neutrality for
state and central governments following the implementation of the new GST
rates. Other precious metals are likely to see the implementation of an extra
concessional GST tax slab as these metals are currently taxed at just 1%
under the slab.
Following is a table of commodities and services and the GST rates

applicable to them:
Commodities/Services GST
Rate
Items that are not listed in any other category, such 18%
as electrical appliances, oil, soaps, etc.
All services like professional charges, fees, 18%

insurance, banking, restaurants, telecom, etc.
Essential farm produced mass consumption items NIL

such as wheat, rice, food grains, etc.
Mass consumption and common use food items 5%

like cotton, mustard oil, tea, spices, etc , but not
including processed foods
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Processed foods 12%
Cars and white goods 28%
De-merits and luxury goods and items that fall 28%

under the sin category, such as aerated drinks, CESS
tobacco, luxury cars, pan masala, etc.
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DIFFERENT TEXTILE MARKET IN INDIA

Indian textile industry is highly fragmented as about 95% of the industry is
unorganized. The predominance of Micro, Small and Medium Enterprises (MSMEs) are
under pressure to modernise, expand and cut cost as there is increasing internal
competition as well as from outside which is forcing individual units to look for
economies of scale. A large number of units therefore coming together either in the
form of strategic alliances or become a part of the cluster. There is a global trend of
buyers on cutting down on the number of suppliers and to prefer sourcing their entire
requirements from two to three vendors to ensure consistent quality and sustainable
quantities which the industry is finding it difficult to fulfill. Geographical Clusters:
Under these circumstances, clusters have come to play a significant role.
Under these circumstances, clusters have come to play a significant role. Several states
in India offer an attractive investment climate for players looking to enter the textiles
and apparel market. Apart from the specific incentives and support offered by the state
governments, factors such as infrastructure availability, manpower availability and
general standard of living are also parameters that affect a company’s investment
decision. Thus specific geographical locations in the country have emerged as
manufacturing hubs for specific products.
Haryana: Haryana has a well established textile sector. It has abundant availability of
raw materials, especially cotton and wool used in various value added products
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specially furnishings at Panipat. In addition, there are a large number of garment

manufacturing units in and around NCR. Gurgaon has emerged as key buying centre.
Andhra Pradesh: The state of Andhra Pradesh has an abundant supply of raw materials
and production facilities. Andhra Pradesh produces 2.6 million bales of medium and
long staple cotton. It ranks second in the production of raw silk, fourth in the production
of wool and fourth in the number of textile mills in India. It is one of the leading textile
processing centers with over 100 units and produces 13 million metres of cotton cloth
per annum The state has good power infrastructure- it is the third largest power utility
in the country. Andhra Pradesh is amongst the leading states in India that have made a
significant progress in power infrastructure generation, transmission and distribution.
Tamil Nadu: Tamil Nadu has the largest cotton textile industry cluster in India which
contributes to 39 per cent of the total production in the country. The country’s largest
textile cluster, Tirupur, is also situated in
Tamil Nadu.
This cluster accounts for 90 per cent of the country’s cotton knitwear exports. The state
is emerging as a global sourcing hub for readymade garments and hosts many global
brands.
Gujarat:
The textile sector contributes 23 per cent to the Gross State Domestic Product (GSDP)
of the state. It contributes 12 per cent to the total textile exports of the country. Gujarat
also produces 40 per cent of the country’s art silk fabric. The state has a well developed
textile machine industry and also various institutes for textile product design and
development, like the National Institute of Fashion Technology (NIFT).Large Fabric
Process Houses are concentrated in Ahmedabad (250) and Surat (450) in the State. The
State accounts for 12% share of the total textile exports of the country.Clusters of
processing units are located at Surat, Vapi, Kutch, Ahmedabad (Narol) and Jetpur.
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Textile Processing Industry has flourished leaps and bound in South Gujarat
particularly in Surat district. There are nearly five lakhs of Powerlooms in Surat, which
consume about four lakhs metric tons yarn in preparing the grey fabrics. About two
crores meters of grey textile is manufactured daily in Surat. Today there are about 450
Dyeing and Printing Units located in and around Surat in various clusters – Pandesara,
Sachin, Kadodara and Palsana. These Dyeing and Printing Units are engaged in
processing of man-made fabrics, i.e. Dyeing, Bleaching , Printing, Finishing of grey
fabrics.Mostly these units are processing the grey fabrics on job work basis. They
receive the grey fabrics from the Traders / Merchant Manufacturersof the market and
process the fabrics as per their requirement. There areabout 150 wholesale markets in
Surat.
Kerala:
Spinning is the single largest industry in Kerala- hand looms contribute to 10 per cent
of the total exports. Cotton yarn is the most popular textile product, followed by knitted
garments and fabrics. The textile-processing complex at Kanjikode, the International
Apparel Park at Thiruvananthapuram and the Industrial Export Park at Kochi, offer
walk-in-and manufacture environments.
Punjab:
Ludhiana in Punjab has also emerged as a major cluster for Woollen knitwear and
hosiery products. Punjab is the biggest centre for woollen garments and second largest
centre for cotton knitwear after Tirupur.
Maharashtra:
Maharashtra has also emerged as a major centre for modern weaving of the manmade
fabrics at Ichalkaranji and Bhiwandi. The silk textiles industry finds concentration in
Andhra Pradesh, Karnataka and Tamil Nadu.
33
34
CHAPTER 5 GST Rates for TextileManufacturers

The GST Council's fitment committee has announced the rates for most
products. Here are the tax rates for products used by the textile
manufacturers.
The final GST rates for the textile industry are yet to be announced. Industry
experts have been asking the GST Council for a 5% levy across the
35
manufacturing chain, and the last word on this is yet to come. We need few
more clarifications before the textile sector can calculate what its tax
liabilities will be post GST implementation.
Until then, we have news on some rates as per the decisions that were taken
on the Day 1 of the Srinagar meeting of the GST Council’s fitment
committee. The products and items used in the textile manufacturing process
have been taxed according to the following structure:
 Taxed at 12%
1. Wood articles: This includes all articles of wood such as clothes hangers,
spools, cops, bobbins, sewing thread reels, and turned wood for textile
machinery.
2. Final products wholly made of quilted or textile materials.
 Taxed at 18%
1. Textile oil: Includes all textile oils other than those that contain petrol,
diesel, and ATF (Aviation Turbine Fluid).
2. Finishing agents: Includes dye carriers, materials used to accelerate

dyeing or fixing of dyestuffs, dressings and mordants.
3. Machinery: This includes all 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.
Also, the machinery for washing, cleaning, wringing, drying, ironing,

pressing (including fusing presses), bleaching, dyeing, dressing, finishing,
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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.
 Taxed at 28%
1. Lubricating oils and preparations: Includes oils and preparations of the

kind used for oil or grease treatment of textile materials. Excludes those oils
that contain 70% or more by weight of petroleum oils, or oils obtained from
bituminous materials.
2. All ready-to-use products made from textiles:
This includes products like travel cases, holsters and similar containers;
travelling bags, insulated food or beverages bags, toilet bags, rucksacks,
handbags, shopping bags, wallets, purses, map cases, cigarette cases,
tobacco- pouches, tool bags, sports bags, bottle- cases, jewellery boxes,
powder boxes, cutlery cases and similar containers made of textile materials.
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CHAPTER4 USES OF E WAY BILL

The inter-state e-way bill was successfully launched across India on the 1st
of April, 2018. At the same time, it was decided that the intra-state e-way
bill will be launched starting from 15th of April, 2018, once the systems
stabilize. In order to ensure a seamless implementation, the states were
divided into batches, and every week, about 4 to 5 states came on board the
e-way bill system.
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Looking at intra-state e-way bill, Gujarat was one of the first states to adapt
the same on the 15th of April, 2018, along with Kerala, Telengana, Andhra
Pradesh and also Karnataka which had gone live from 1st April itself.
Needless to stay, business across Gujarat are now expected to start using the
e-way bill Gujarat portal. More importantly, they need to be aware about the
various provisions of the e-way bill, in order to generate e-way bills in
Gujarat, and transition smoothly into the e-way bill era without any hassle.
E-way Bill Gujarat - Pre-GST Era
Prior to GST i.e. in the VAT era, a waybill system was in existence in
Gujarat for tracking the movement of goods. For any movement of taxable
goods, from or to the state of Gujarat, a permit in Form 402 or Form 403 or
39
Form 405 was made applicable. All three forms could be generated by
visiting the official website of Gujarat’s commercial tax department.
Under the VAT system, a consignor was required to electronically generate

Form 402 for the movement of goods moving out of the state. This form had
to be generated in triplicate – for the consignor, for the driver and for the
consignee.
Similarly, for the movement of goods into the state of Gujarat, a permit in
the shape of Form 403 was required to be generated in triplicate by the
consignor.
E-way Bill – Current Scenario
E-way Bill Registration - Gujarat
Any GST registered user who wants to gain access to the e-way bill facility,
needs to register themselves on a one-time basis at the e-way bill Gujarat
portal. If one is a registered business or transporter, one can navigate to the
e-way bill portal, click "Registration" on the home page, click “E-way
Registration” and then complete the registration formalities. At the end of
this process, a unique user ID will be allotted to the user for logging into the
e-way bill Gujarat portal. Unregistered transporters too, can register under
GST, by using their business details, post which a transporter ID will be
issued.
This has translated into ease of trade for Gujarat, specifically for its textile
industry, which contributes significantly to the total textile output of the
country. With textiles being kept out of the purview of e-way bill, the dealers
40
belonging to this sector, see this as a great step to continue their business in a
hassle free manner. On the other hand, Gujarat is also a hub of
manufacturing. In the recent GST Council meetings, some changes have
been introduced pertaining to the validity of the e-way bills. The timelines
have been made common for all items in transit – which has raised the
logical question, that whether the time can be considered the same for
general items vs. heavy machinery and large equipment which are used in
manufacturing processes. This is thus an operational issue which needs to be
solved for better implementation of the e-way bill across the state
E-way Bill Generation
Any business can generate e-way bill in Gujarat, by visiting the official e-
way bill Gujarat portal, which redirects to the GST e-way bill portal. Details,
such as consignee name and address, item description, value of goods,
quantity etc. are to be provided in order to generate the e-way bill, which can
now be seamlessly done via a user-friendly form. In addition, one can
generate e-way bill in Gujarat, as well as manage and cancel the same via
SMS as well.
Thus, it is essential, that businesses are clear about how to generate e-way
bills in Gujarat, in order to carry forward their business in a compliant
manner.
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CHAPTER NO.5 BENEFITS

1. GST eliminates the cascading effect of tax
GST is a comprehensive indirect tax that was designed to bring the indirect
taxation under one umbrella. More importantly, it is going to eliminate the
cascading effect of tax that was evident earlier.
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Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this
example to understand what is Tax on Tax:
Before GST regime:
A consultant offering services for say, Rs 50,000 and charged a service tax
of 15% (Rs 50,000 * 15% = Rs 7,500).
Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT
(Rs 20,000 *5% = Rs 1,000).
He had to pay Rs 7,500 output service tax without getting any deduction of
Rs 1,000 VAT already paid on stationery.
His total outflow is Rs 8,500.
Under GST
GST on service of Rs 50,000 @18% 9,
Less: GST on office supplies (Rs 20,000*5%) 1,
Net GST to pay 8,
2. Higher threshold for registration
Earlier, in the VAT structure, any business with a turnover of more than Rs 5
lakh (in most states) was liable to pay VAT. Please note that this limit
differed state-wise. Also, service tax was exempted for service providers
with a turnover of less than Rs 10 lakh. Under GST regime, however, this
43
threshold has been increased to Rs 20 lakh, which exempts many small

traders and service providers.
Let us look at this table below:
Tax Threshold Limits
Excise 1.5 crores
VAT 5 lakhs in most states
Service Tax 10 lakhs
GST 20 lakhs (10 lakhs for NE states)
3. Composition scheme for small businesses
Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can

benefit as it gives an option to lower taxes by utilizing the Composition
scheme. This move has brought down the tax and compliance burden on
many small businesses.
4. Simple and easy online procedure
The entire process of GST (from registration to filing returns) is made

online, and it is super simple. This has been beneficial for start-ups
especially, as they do not have to run from pillar to post to get different
registrations such as VAT, excise, and service tax.
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5. The number of compliances is lesser
Earlier, there was VAT and service tax, each of which had their own returns
and compliances. Below table shows the same:
Under GST, however, there is just one, unified return to be filed. Therefore,
the number of returns to be filed has come down. There are about
11 returns under GST, out of which 4 are basic returns which apply to all
taxable persons under GST. The main GSTR-1 is manually populated and
GSTR-2 and GSTR-3 will be auto-populated.
6. Defined treatment for E-commerce operators
Earlier to GST regime, supplying goods through e-commerce sector was not
defined. It had variable VAT laws. Let us look at this example:
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Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had
to file a VAT declaration and mention the registration number of the
delivery truck. Tax authorities could sometimes seize goods if the documents
were not produced.
Again, these e-commerce brands were treated as facilitators or mediators by

states like Kerala, Rajasthan, and West Bengal which did not require them to
register for VAT.
All these differential treatments and confusing compliances have been

removed under GST. For the first time, GST has clearly mapped out the
provisions applicable to the e-commerce sector and since these are
applicable all over India, there should be no complication regarding the
inter-state movement of goods anymore.
Read a more detailed analysis of the impact of GST on e-commerce.
7. Improved efficiency of logistics
Earlier, the logistics industry in India had to maintain multiple warehouses

across states to avoid the current CST and state entry taxes on inter-state
movement. These warehouses were forced to operate below their capacity,
giving room to increased operating costs.
Under GST, however, these restrictions on inter-state movement of goods

have been lessened.
As an outcome of GST, warehouse operators and e-commerce aggregators

players have shown interest in setting up their warehouses at strategic
46
locations such as Nagpur (which is the zero-mile city of India), instead of

every other city on their delivery route.
Reduction in unnecessary logistics costs is already increasing profits for

businesses involved in the supply of goods through transportation.
Visit here to read more about the impact of GST on logistics.
8. Unorganized sector is regulated under GST
In the pre-GST era, it was often seen that certain industries in India like
construction and textile were largely unregulated and unorganized.
Under GST, however, there are provisions for online compliances and
payments, and for availing of input credit only when the supplier has
accepted the amount. This has brought in accountability and regulation to
these industries.
CHAPTER 6 DISADVANTAGES
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1. Increased costs due to software purchase
2Businesses have to either update their existing accounting or ERP software

to GST-compliant one or buy a GST software so that they can keep their
business going. But both the options lead to increased cost of software
purchase and training of employees for an efficient utilization of the new
billing software.
Clear Tax is the first company in India to have launched a ready-to-use

GST software called Clear tax GST software. The software is currently
available for free for SMEs, helping them transition to GST smoothly. It has
truly eased the pain of the people in so many ways.
2. Being GST-compliant
Small and medium-sized enterprises (SME) who have not yet signed for
GST have to quickly grasp the nuances of the GST tax regime. They will
have to issue GST-complaint invoices, be compliant to digital record-
keeping, and of course, file timely returns. This means that the GST-
complaint invoice issued must have mandatory details such as GSTIN, place
of supply, HSN codes, and others.
Clear Tax has made it easier for SMEs with the Clear Tax Bill Book web
application. This application is available for FREE until the end of
September and is an easy solution to this problem. This will help every
business to issue GST-compliant invoices to their customers. These same
invoices can then be used for return filing through the Clear Tax
GST platform.
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3. GST will mean an increase in operational costs
As we have already established that GST is changing the way how tax is
paid, businesses will now have to employ tax professionals to be GST-
complaint. This will gradually increase costs for small businesses as they
will have to bear the additional cost of hiring experts.
Also, businesses will need to train their employees in GST compliance,

further increasing their overhead expenses.
4. GST came into effect in the middle of the financial year
As GST was implemented on the 1st of July 2017, businesses followed the
old tax structure for the first 3 months (April, May, and June), and GST for
the rest of the financial year.
Businesses may find it hard to get adjusted to the new tax regime, and some
of them are running these tax systems parallel ,
resulting in confusion and compliance issues.
5. GST is an online taxation system
Unlike earlier, businesses are now switching from pen and paper invoicing
and filing to online return filing and making payments. This might be tough
for some smaller businesses to adapt to.
Cloud-based GST billing software like the ClearTax GST Billing

Software is definitely an answer to this problem. The process for return
filing on ClearTax GST is very simple. Business owners need to only upload
their invoices, and the software will populate the return forms automatically
with the information from the invoices. Any errors in invoices will be clearly
49
identified by the software in real-time, thus increasing efficiency and

timeliness.
6. SMEs will have a higher tax burden
Smaller businesses, especially in the manufacturing sector will face

difficulties under GST. Earlier, only businesses whose turnover exceeded Rs
1s.5 crore had to pay excise duty. But now any business whose turnover
exceeds Rs 20 lakh will have to pay GST.
However, SMEs with a turnover upto Rs 75 lac can opt for the composition
scheme and pay only 1% tax on turnover in lieu of GST and enjoy lesser
compliances. The catch though is these businesses will then not be able to
claim any input tax credit. The decision to choose between higher taxes or
the composition scheme (and thereby no ITC) will be a tough one for many
SMEs.
THE REASONS FOR GST WHIP ON SME

The textile industry has been one that has bore majority of the brunt for hasty GST
implementations. The story of the textile industry is one that strikes a common chord
across most if not all SME sector. Some of the key impending GST shortcomings that
negatively impacted these enterprises include:
A tax reform for the educated: Most dealers and workers in the SME sector are not
schooled or at most limited to sub-secondary levels. Hence, getting their head around
50
the new Tax norms from day 1 as well as keeping up with the early stage compliance
web proved too much for too many.
GST mandates tax collections at each stage of the production. This is one paramount
factor which grants GST its inherent transparency. This has also been a major curtain
puller for small-scale enterprises like power looms which have failed miserably to keep
up the pace with the compliance demands.
Hiring Accountants was never a feasible alternative for most dealers post
demonetization. The looming capital crunch, as well as the constant amendments, drove
businesses out of operations. Sales orders have been canceled across industry verticals.
Moreover, if too many and frequent changes in tax rate and rules were not enough to
halt business operations, the delays in tax claims owing to GSTN glitches and other
issues was the final nail in the coffin for some business.
Some of the industries which have registered major GST impact are Readymade
garments, gems and jewelry, leather, handicraft, and basic machinery manufacturing.
The total count for close businesses owing to capital crunch and growing compliance
burden stands at 230,000. This has lead to a wave of job losses in the SME Sector.
Job Losses and GST
In August 2018 India’s unemployment rate stood at 6.4 percent. This was an increase of
more than 2% from July last year. Nearly 17 million people joined India’s workforce
last year. Hence, data cements the fact that the rate of unemployment is greater than that
of employment during the period.
All India Trade Union Congress (AITUC) claims that nearly 12 million small
businesses have witnessed a steep fall in profits since GST rollout. This in return affects
employment. Most SME companies have laid off thousands of low-income workers.
Hence, GST has been some sort of a double sword for SME owners and workers.
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TRANSITIONAL ISSUES
GST is replacing a multiple tax regime by a single tax regime. “Transition Provisions”
contained in Chapter XX of the CGST/SGST Act, supported by Transition Rules,
would ensure that shift from old tax regime with multiple taxes and multiple statutory
provisions to the GST regime is seamless and smooth. The transition provisions ensure
that there is, -
 Zero double taxation,
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 Zero loss of input tax credit,
 Zero hindrance in movement of goods and
 Zero disruption in business activities.
The transition provisions address the issues of GST registration of existing Central and
State tax payers, transfer of existing Central and State input tax credits, availability of
credit of Central & State taxes in respect of goods lying in stock and goods in transit.
(a) Transition of Registration:
All tax payers registered for Central Excise, Service Tax and VAT, having valid PAN
numbers, have been given automatic provisional GST registration. All such tax payers
would get final registration on submission of prescribed documents. Textiles sector tax
payers, who are registered under Central Excise, Service Tax and VAT have been
provided provisional GST registration to facilitate seamless transition. New taxpayers
from textiles sector would seek fresh GST registration that would be open from 25th
June 2017.
(b) Transition of Input Tax Credit:
(i) Manufacturers/service providers / dealers having existing registration under Central

Excise, Service Tax and VAT are eligible to carry forward CENVAT/ST/VAT credit as
ITC under the GST. The input tax credit balance declared in the records and returns as
on 30.06.2017 would be fully eligible for transfer as ITC under the GST. They are also
entitled to carry forward balance and unavailed CENVAT credit on capital goods by
filing requisite declaration. Accordingly, MMF (manmade fibre) yarn manufacturers of
textiles sector, presently registered for payment of excise duty/ST/VAT have the facility
to carry forward balance CENVAT/VAT credit.
(ii) Some manufacturers/service-providers/dealers are not required to be registered

under existing laws as they deal in exempted goods/services. They would be eligible to
take ITC on inputs / semi-finished goods / finished goods that would be used for
53
making taxable supplies under the GST regime. The ITC in such cases would be equal
to the full amount of duty/tax as indicated under the tax invoice for such inputs,
provided such tax invoice is not more than 1 year old i.e. only such invoices which are
issued on or after 2 nd July 2016 would be eligible.
(iii) A trader / dealer not registered earlier would be eligible to take ITC on inputs /
semifinished goods / finished goods that would be used for making taxable supplies
under the GST regime. In case, such person has tax invoices, ITC would be equal to the
full amount of 33 duty/tax as indicated on tax invoice. In case of non-availability of tax
invoices, such persons would be eligible to take input tax credit of 60% of GST paid
where GST rate on intra-state transactions is 18% ad valorem or more and 40% of GST
paid in other cases. In case of interstate transactions, such deemed ITC would be 30%
and 20% respectively. This facility would be available for a period of six months on
such goods/stocks that were not unconditionally exempted under old tax regimes. This
provision is not applicable for manufacturers.
(iv) Cenvat credit in respect of input services reversed under existing law for failure to
make payment of consideration within three months can be revived if consideration is
paid within three months of appointed day.
(v) Credit in relation to stock received under inter-State sale would be available by
providing information of value and serial number of relevant forms E, H, etc.
(vi) Full Credit of both Central & State taxes paid on goods in transit on the appointed
day i.e. 01.07.2017 would be available on the basis of relevant duty/tax paying
documents. The invoice of such goods must however be recorded in account books
within 30 days’ period which can be extended by further 30 days by the Commissioner.
(vii) A person registered for GST, who earlier operated as “composition taxpayer”, shall
be entitled to take credit of duties and taxes in respect of goods held in stock on
01.07.2017.
(c) No double taxation in transition:

54
(i) GST shall not be payable in respect of supply of goods & services which have
suffered tax under the earlier tax laws.
(ii) GST shall not be payable in respect of return goods, for a period of six months,
which were cleared before 01.07.2017 on payment of tax under the earlier tax laws.
(iii) Goods sent for job work before 01.07.2017 would not attract GST when returned
from job worker to principal within six months.
(d) Job Work in transition:
No GST would be payable on inputs/goods cleared to job worker as per existing laws
before appointed day if such goods are returned back by job worker within 6 months of
the appointed day. Period of 6 months may be extended by another 2 months by the
Commissioner. If such inputs are not returned within the specified period, input tax
credit would be inadmissible. Such goods may be cleared from job worker’s premises
on payment of applicable tax or for export without payment of tax.
(e) Refund Claims:
All pending refund claims shall be dealt with as per existing laws and refunds shall be
paid in cash irrespective of statutory provisions to the contrary.
(f) CENVAT Credit cases:
All appeals, review or reference relating to CENVAT credit claim would be disposed as
per existing laws and amount of credit held admissible shall be paid in cash. If any
claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected
shall lapse.
(g) Goods cleared on approval basis:
The goods cleared on approval basis and returned within 6 months of the appointed day
shall not attract GST. The period of 6 months may be extended by another 2 months by
the Commissioner. GST shall be payable by person returning goods after the prescribed
55
period if such supply attracts GST. GST shall be payable by person sending goods if
goods are not returned within 6 months and such supply attracts GST.
CHAPTER 7 IMPACT ON MSME SECTOR

The industry at Tirupur have informed that in textile clusters like Tirupur, host of job
work operations such as garment printing, embroidery, garment washing, tie and dye,
checking, button fixing, labeling, ironing and packing are carried out by micro
industries on job work basis which are carried out ‘in relation to wearing apparel’ and
accordingly not covered by entry 13 A. It has been stated that some of these processes
such as checking, ironing and packing, button fixing, etc., are actually carried out by
people ‘who take work to their home for job work’. It has been contended that as these
processes are only of B2B nature and since the final product namely garments is falling
under 5% slab, levying 18 % on job work will create an inverted duty scenario and that
the intention of removing the hardship for the MSME industry by reducing the GST
Rate on job work will not be fully served if these tiny and micro industries as listed
above are excluded from the benefit of rate reduction. They have requested that the rate
be reduced to 5% on “job work services for wearing apparels” also be reduced to 5%. It
has also been contended that as these job workers fall in the middle of the textile
manufacturing value chain where the credit is ultimately passed on to the final
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manufacture, there is absolutely no revenue implication in case the rate is reduced to

5%.
It has been represented that Rate of tax on cotton quilts (9404) is 18% and on other
quilts 28% whereas blankets (6301) having sale value upto Rupees 1000 per piece and
above Rupees 1000 per piece are put in the slab of 5% and 12% simultaneously. It has
been submitted that quilts (JaipuriRajai) included have similar usage like blankets and
mostly made from hand-printed clothes produced by artisans and that this sector
provides a large number of employment to weaker sections of the society. Request has
been for reduction of rate on Quilts to 5% for aligning with other similar goods.
TAXATION STRUCTURE UNDER GST REGIME

The taxation structure for textiles in the pre-GST era was primarily divided into the
Central Excise duty and VAT, CST and local body taxes which are levied and collected
by the states, with the overall incidence of such taxes varying across different states.
This resulted in a fragmented input tax credit chain, leading to embedded taxes and cost
escalations. The Tax structure on Textiles consisted of the following levies:
Central Taxes:
1. Central Excise Duty on all goods falling under Chapter 61, 62 and 63 bearing a brand
name (primarily Branded Ready Made Garments) having a Retail Sales Price of Rs.
1000 and above was 2% (without Cenvat) and 12.5% (with Cenvat), with the tariff
value of 60% of Retail Sales Price to account for value-addition after manufacture.
Optional Central Excise duty route has been available since 2004 in case of cotton,
MMF and Spun yarn at the yarn, fabric and garment stage, wherein duty was payable if
the manufacturer opted to avail CENVAT, else the trader/manufacturer had the option
of clearing goods without payment of Central Excise duty though no Cenvat credit of
57
inputs, input services and capital goods was allowed. In case of cotton, there is zero
duty at the fibre stage and in case of MMF,Central Excise duty of 12% is levied at the
fibre stage.
2. Service Tax: Textile sector avails various input services for manufacturing its
finished products The service tax so paid on such input services cannot be set off since
presently this sector is largely under duty exemption. Hence such service tax paid on
input services becomes a cost. Service Tax on service in relation to textile processing is
currently exempt.
State Taxes:
3. VAT/ Central Sales Tax Most of the States in India have exempted textiles and
fabrics from the levy of VAT / Central Sales tax. Garments including textiles are being
subject to lower rate of VAT/ Central Sales tax in most of the States. It is in the range of
5%- 6%. For small players, the option of paying taxes at concessional rates is also
provided under composition scheme in many States.
4. Entry tax Textiles such as cotton, woolen or silk or artificial silks are liable to entry
tax in some States like Karnataka, at the rate of 1% which adds to the purchase cost.
GST
GSTSTRUCTURE
STRUCTURE
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59
Has The Industry Adapted To GST ?

The MSME industry is highly competitive, especially for India, as it faces a tough
competition from almost all its neighbouring countries. Reduction of duty drawback
rates has taken away the cost advantage India used to enjoy in the global market.
Moreover, increase in MSP (Minimum Support Price) to the farmers, has further led to
a growth in the price of the raw material, i.e. cotton and yarn in the country. Currently,
India is exporting 25 to 30% of its raw material produce to neighbouring competitors,
which is concerning, as exporting raw material and importing garments will further
push India’s growth backward in the segment.
The domestic industry, however, has seemed to have coped up with the demonetization
and GST blues. The market is sluggish, yet the domestic industry is on a growth
trajectory. Although growing garment imports from Bangladesh, Vietnam, Sri Lanka,
etc. is threatening this growth.
The textile industry does not enjoy huge margins on its products. Thus blocked working
capital is troubling manufacturers, especially the MSME segment.
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Rushing to the aid of small textile units in Tamil Nadu is all very well, but
the manner in which their affairs are mismanaged also needs to be
understood.
It is reported that 79 micro-, small and medium enterprises (MSMEs) fall sick in a day, probably three units an
hour. Out of 1.33 crore sick units in the country, more than two lakh are currently sick and 29,000 units are being
61
added to the list every year. In financial terms, these units account for more than Rs 7,000 crore of outstanding
loans.
A unit is deemed to be sick in the following circumstance: when, after borrowing from financial institutions, it
has not paid its instalments on due dates; the situation continues for more than six months in this way; and there
is an erosion in net worth due to reported losses to the extent of half of its net worth in the previous accounting
year.
In Tamil Nadu, for example, out of the 14 lakh SME units, 25,433 units are sick with 566 of them eligible for
rehabilitation according to the guidelines of the Reserve Bank of India. Recently, there was a strong
representation from textile units on the need to rehabilitate sick textile units, involving about Rs 50,000 crore.
After a lot of deliberations, the reference by the Ministry of Finance to the RBI did not elicit a positive response.
It was thought that since only 22 per cent of the textile units had suffered, a mass-crisis approach to the problem
was not warranted.
Thanks to some initiative by financial institutions, a relief package is likely to come of these discussions. But to
ensure that efforts to help MSMEs in the sector do not lead to nought, the problems of these units should be
understood. Or else, it might become a case of throwing good money after bad.
A study of each case will reveal some common factors, which can act as an insight for both financial institutions
and new MSME players.
The textiles story involves unscrupulous speculative trading in cotton, pushing prices high and bringing it down
in a short span, resulting in losses at lower prices of yarn. While this is the macro-reality, the nitty-gritty of
management need to be accorded some attention.
How can a turnaround of textile MSMEs be brought about?
INFORMATION DEFICIT
Review and Documentation: Lured by the promise of some promoters of industrial/textile parks in Tamil Nadu,
we find some first-generation entrepreneurs, who have traditionally been farmers, selling their land and starting
micro-units in textile weaving, with little technical know-how. They find it difficult to break even, due to the
unfulfilled promises of such industrial park promoters on issues such as power, export potential, water and roads.
As a result, the capital outlay and bank finance become non-performing assets, resulting in wastage of resources.
Hence, any first-generation entrepreneur must take professional advice on documentation and technical details of
the project, by earmarking a small portion of his capital outlays to this end.
Bankers, instead of rushing to give loans to such MSMEs, must also study the viability of industrial parks, as
they have the wherewithal to evaluate such industrial parks.
62
Emu farming in the Tamil Nadu belt is one instance where promoters lured innocent farmers into a financial
crisis. The Tamil Nadu Government, in its recent Budget, outlined the New Entrepreneur-cum-Enterprise
Development Scheme for first-generation entrepreneurs. But it is yet to be effective.
Quantity versus Quality of Turnover: In their rush to record higher turnover, MSMEs tend to undercut prices,
which affect their profitability. They resort to giving long-duration credit, impacting their break-even levels and
triggering a liquidity crisis. MSMEs must strive for quality of turnover with lesser delays in realisation, enabling
more turnaround of their working capital.
Export Risks: We find many MSMEs weak on the quality control side. Emboldened by the success they see in
small exports, they resort to high volume exports without adequate safeguards, such as quality approval by their
overseas customers. Not being exposed to export formalities, many MSMEs face rejection of their goods.
Products, involving a two to three months’ production cycle, are stuck up at destination points on account of
quality problems raised by overseas buyers. This causes a liquidity crisis. Trade associations can play an
effective role and arrange for effective advisory services.
DEBT TRAP
Lack of Qualified Accounting Personnel: We find that even Rs 300-crore units in Tirupur do not have
qualified professionals to handle their finance, leaving the function to lesser qualified yes-men. As a result we
find the absence of good MIS reporting standards and periodical review of operations on a broader scale.
The first golden rule of effective monitoring of operations monthly is sacrificed for preference for semi-qualified
non-professionals. In the case of small units which cannot afford qualified professionals, the relevant trade
associations can pave the way for advisory services.
Working-Capital Management: MSMEs must realise that working-capital funding is need-based and is not a
permanent item to appear in their books. MSMEs must strive to reduce their exposure on this account when they
show growth in sales and profitability, instead of constantly upgrading their exposure in times of plenty and
struggling to service the debt in times of crisis.
In the absence of good financial reporting and planning, many MSMEs tend to ignore the need to trim or
optimise their working capital.
They fall into a debt trap, thanks to the overenthusiastic financial consultants that they employ to secure
renewals. To ensure more transparency in the financials, banks must reinforce independent audit of current assets
of MSMEs to ensure that all is well with their portfolios.
A close look at the ailing units reveals that statutory payments such as PF, income tax and TDS slowly fall into
arrears, indicating cash-flow problems. Any attempts to gloss them over and look for avenues of enhanced credit
will lead to a debt trap. Perhaps this is vital factor leading to the liquidity crisis. Credit rating agencies must
include this as one of the parameters while assessing the effectiveness of financial management.
63
Constant monitoring and guidance can prevent resource wastage of the partners of the enterprise, that is, the
bankers, the lender, the supplier, the client, the staff and the Government.
64
65

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Impact of GST on Textile Sector

STUDY ON IMAPACT OF GST ON TEXTILE

FOR THE ACADEMIC YEAR 2018-19

In Partial Fulfilment of Requirements or the Award of the MASTER IN

MS. DHANRAJ SHARMA

Roll No. 1768076

UNDER THE GUIDANCE OF

Mr. NIKESH MUSLONKAR

ASM’s INSTITUTE OF MANAGEMENT & COMPUTER STUDIES

I am DHANRAJ SHARMA student of MMS Semester III (2018-20197) hereby

The information submitted is true and original to the best of my knowledge.

ROLL NO. 1768076

Name of the owner Ramjiwan sharma

Name of manager Nemichand Sharma

Nature of business Wholesale cloth merchant

he moved to Ichalkaranji in 1988 to ichakaranji to pursue his dreams into

VISION MISSION & PHILOSOPHY

To become a most trusting and value adding firm in clothsegment of India.

In coming future we want to enter in other segments of cloth materials.

At jai ambe textiles we work on formula given by our founder

“Aapka vyavahar hi tay karega apka vyapaar” which means if your

GLOBAL VIEW 21-27

MONETARY POLICY 29-33

NEED&TYPES FOR MONETARY POLICY 34-39

ISSUES IN INDIAN BANKING 40-52

FUNCTIONS OF MONETARY POLICY 53-56

INSTRUMENTS OF MONETARY POLICY 57-73

ROLE OF RBI IN MONETARY POLICY 74-78

QUESTION BANK 86-88

12 BIBLIOGRAPHY & WEBLIOGRAPHY 92

The textile industry in India traditionally, after agriculture, is the only

Production of man-made fibre has also been on an upward trend

During FY171, production of man-made fibre in India stood at 1.364 million

contributes approximately 2 per cent to India’s Gross Domestic Product

Indian khadi products sales increased by 33 per cent year-on-year to Rs

The total area under cultivation of cotton in India is expected to increase by

Indian exports of locally made retail and lifestyle products grew at a

units of garments by March 2018, which is expected to grow to 800 million

Raymond has partnered with Khadi and Village Industries Commission

The Indian government has come up with a number of export promotion

Initiative will be taken into consideration by Government of India.

The Government has planned to connect as many as 5 crore (50 million)

TECHNOLOGY UP-GRADATIONFUND SCHEME-TEXTILE SECTOR(TUFS)

Scope of the Scheme

a. Cotton ginning and pressing.

b. Silk reeling and twisting.

c. Wool scouring, combing and carpet industry.

d. Synthetic filament yarn texturising, crimping and twisting.

f. Viscose Staple Fibre (VSF) and Viscose Filament Yarn (VFY).

g. Weaving, knitting and fabric embroidery

h. Technical textiles including non-wovens.

i. Garment / design studio / made-up manufacturing

j. Processing of fibres, yarns, fabrics, garments and made-ups.

k. Production activities of Jute Industry.

2. To know & understand the sector after the introduction of GST.

3. To know about the implications after the introduction of GST.

4. To know & understand the scope of textile products.

2. The study is limited to manufacturing sector only.

During the late medieval period, cotton began to be imported into

Exports by the cotton industry – centered in Lancashire – had grown tenfold

TEXTILE INDUSTRY BEFORE INDEPENDENCE

The cotton textile industry is rightly described as a Swadeshi industry

TEXTILE INDUSTRY AFTER INDEPENDENCE