Textile units under GST lens for mis-classifying services

Central Goods and Services Tax (CGST) officials in the recent months have investigated over two dozen textile manufacturing companies across the country for mis-classifying textile processing activities and subsequently paying lesser tax.

According to official sources, the CGST department has observed that several textile manufactures are recording activities which involve ‘changing the nature of cloth’ as ‘washing and dyeing’, and therefore are paying lower tax rate of those incomes.

Under the GST laws, washing and dyeing are considered as ‘job work services’ in the textile industry and attract a GST rate of 5%; while processes that significantly transform the fabric, such as bleaching, printing, or other treatments that alter its essential characteristics, attract a GST rate of 18%.

ALSO READAI being used for collusion, says CCI chairperson

“Textile manufacturers are knowingly misclassifying the services…and paying 5% tax, where they should pay 18%. CGST officials are investigating units of all kinds of firms (corporates, small & medium companies) across India,” said an official. Authorities feel the shortfall in tax-payment is to the tune of hundreds of crores, causing a substantial loss of revenue to the government.

Tax experts say that the GST misclassification in the textile industry arises from ambiguity in tax slabs. “Some manufacturers have allegedly misclassified transformative processes under the 5% category. The issue stems from multiple GST rates, unclear definitions, and potential misuse,” noted Sivakumar Ramjee, executive director, Nangia Andersen.

Krishan Arora, partner, Grant Thornton Bharat said: “This appears to be a clear case of mis-interpretation, with the Department’s stance contradicting the GST legislation’s original intent. In this regard, a definitive resolution is essential to provide much-needed clarity to the industry.”

ALSO READAmazon responds after BIS raids uncover uncertified products at warehouses

Since the inception of GST in 2017, India’s textile industry has witnessed profound shifts, with job work services being integral to this transformation. A major point of contention has been the GST classification of textile processing activities like dyeing and printing, say experts.

Initially, tax authorities argued that these processes, which substantially alter fabrics’ essential characteristics, should be taxed at 18%, instead of the current 5% to safeguard government revenues. Building on this, during the 45th GST Council meeting, a proposal to increase the rate of dyeing and printing services to 12% was deliberated.

 » Read More

Related Articles

Textile units under GST lens for mis-classifying services

Central Goods and Services Tax (CGST) officials in the recent months have investigated over two dozen textile manufacturing companies across the country for mis-classifying textile processing activities and subsequently paying lesser tax. According to official sources, the CGST department has observed that several textile manufactures are recording activities which involve ‘changing the nature of cloth’

AI being used for collusion, says CCI chairperson

Artificial intelligence (AI) is being used for “collusion” by sections of Indian industry, Ravneet Kaur, chairperson of Competition Commission of India (CCI) said on Sunday, adding that the regulator would equip itself to deal with it. “Companies are using AI to coordinate prices without explicit agreements, and are engaging in algorithmic discrimination under the garb

How Women Can Build Wealth Through Real Estate: Key investment tips

Owning a home is one of the most significant steps toward financial security, both for individuals and families. While men have traditionally taken the lead in property purchases in India, the trend is gradually changing, with more women actively investing in real estate. Recognizing this shift, both state governments and financial institutions have introduced various

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

0FansLike
0FollowersFollow
0SubscribersSubscribe
- Advertisement -

Latest Articles

Textile units under GST lens for mis-classifying services

Central Goods and Services Tax (CGST) officials in the recent months have investigated over two dozen textile manufacturing companies across the country for mis-classifying textile processing activities and subsequently paying lesser tax. According to official sources, the CGST department has observed that several textile manufactures are recording activities which involve ‘changing the nature of cloth’

AI being used for collusion, says CCI chairperson

Artificial intelligence (AI) is being used for “collusion” by sections of Indian industry, Ravneet Kaur, chairperson of Competition Commission of India (CCI) said on Sunday, adding that the regulator would equip itself to deal with it. “Companies are using AI to coordinate prices without explicit agreements, and are engaging in algorithmic discrimination under the garb

How Women Can Build Wealth Through Real Estate: Key investment tips

Owning a home is one of the most significant steps toward financial security, both for individuals and families. While men have traditionally taken the lead in property purchases in India, the trend is gradually changing, with more women actively investing in real estate. Recognizing this shift, both state governments and financial institutions have introduced various

Ghaziabad Namo Bharat Station to get tech-enabled co-working spaces

The National Capital Region Transport Corporation (NCRTC) is set to launch a co-working space, named MetroDesk, at the Ghaziabad Namo Bharat Station soon. This innovative initiative aims to turn urban transit areas into dynamic business hubs, introducing a pioneering coworking model within the Namo Bharat network. MetroDesk is tailored for professionals, entrepreneurs, and small businesses

8th Pay Commission: Central employees’ commuted pension to be restored after 12 years?

8th Pay Commission News: The long-standing demand for the restoration of commuted pensions is again in discussion. Currently, this pension is restored after 15 years, but employee organisations want the government to cut this commutation period to 12 years. Now, after the announcement of the 8th Pay Commission, employees are hopeful that the government may