AEPC Chairman Ashok Rajani shared his response on GST and its impact on the Apparel Sector with Team Perfect Sourcing. Excerpts. . .
Our Apparel industry is preparing itself for the GST which is expected to significantly reduce transaction cost and time on the one hand, but is also expected to increase procedural and compliance costs on the other. To gauge the impact of GST on Cotton garments a calculation based on the pre & post GST rates has been worked-out and it largely suggests that major items like T-shirts, shirts, pants, dresses and blouses would be cheaper post GST rollout in case they are branded and are priced at Rs. 1000/ and above. In case of non-branded garments, there will not be any change since there was a 5% VAT and the applicable rate of GST would also be 5%.
Raw cotton is expected to be little cheaper, but cotton yarn which is expected to attract 5% GST, will become a tad more expensive. Similarly cotton yarn exports will get little expensive, but since input tax credit would be available, composite mills would be benefitted as individual stage-wise taxation will not be levied.
Another positive outcome of the GST rollout is the significant reduction in the logistics cost and resultant efficiency in the movement of goods. Due to an inordinate amount of waiting time at check posts, today an Indian transport vehicle covers a distance of only 280 km per day on average as against the global average of 400 km and the US average of 700 km.The abolition of check posts due to the enabling of GST would lead to a faster and cheaper movement of goods between states.
In the current indirect tax regime, taxes are levied at each stage with excise duty being levied on manufacture. When this is compared with GST, which is levied only at point of sale and not at the point of purchase and manufacturing, the consumer will be bearing only the GST charged by the last dealer in the supply chain, thus simultaneously making it cheaper for the consumer and increasing the profitability of the business.
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