Until now, the textile industry which remained out of the indirect tax implication, with the implementation of GST shall attract 5% tax. The firmness on the ground has been supported by primarily three grounds which are put as though by the finance ministry.

First if the levy on fabrics is made zero then the manufacturers in the value chain of textile shall not be able to get the tax credit for taxation on previous stages.
The Finance ministry said "the main demand of the textile traders is not to put any tax on fabrics. However the same cannot be accepted" reiterated Arun Jaitley while replying to the question put up in Rajya Sabha.

To revoke the GST rate of 5%, the textile industry in Surat has gone on strike. Another important reason cited is that imported fabrics shall have zero rating then while domestic fabric will continue to face input tax. So on the whole, the domestic textile industry shall lose its competitiveness in the market to imports.

Further as said by the Finance minister, it is wrong to assume that no tax applied to textile industry, wherein in 2003-2004, the entire sector was subjected to central excise duty.

Also, post-GST the rates on fabrics are said to be at par or less than the pre-GST levels for the textile sector as a whole. And so, the price of fabrics is unlikely to go up and result in any major impact on end-consumer.

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