After more than a decade-long journey, the biggest indirect tax reform since independence -- GST -- will be launched midnight today.
There appears to be a lot of confusion and apprehension among various sections of the trading and business community, some of whom are protesting against certain provisions of the new indirect taxation law.
GST, termed as the most radical tax reform since independence, seeks to subsume all central indirect taxes like excise duty, countervailing duty and service tax as also state levies like value added tax, entry tax and luxury tax, to create a single, pan-India market.
So far, apart from Jammu and Kashmir, all states have passed the GST law.
India’s small, non-integrated manmade fabric manufacturers feel threatened by GST.
Under GST, manmade fiber yarn will be taxed at 18 per cent while its end product, fabric, will be taxed at five per cent. Tax differential leaves integrated textile firms which produce yarn and use it to make fabric at an advantage over those which buy yarn to make fabric. Also, cotton made yarn and fabric will attract five per cent duty.
This imbalance is expected to hit small textile companies which buy manmade yarn to weave fabric. In addition, since imported fabric will attract 15 per cent effective duty, cheaper Chinese goods may also pose a serious threat.