Removal of Inverted Tax Structure on MMF Textiles

Removal of Inverted Tax Structure on MMF Textiles

Value chain and uniformity of rates bring relief to the Textiles sector.

A Uniform rate of 12% for the entire value chain of the MMF textiles sector will reduce the compliance burden of the industry players. MMF textiles sector will be benefited and will save a lot of working capital. It will provide clarity to the industry and settle, once and for all, the issues caused by the inverted tax structure

The Government has notified uniform goods and services tax rate at 12 % on MMF, MMF yarn, MMF fabrics and apparel that has addressed the inverted tax structure in the MMF textile value chain. The changed rates will come into effect from 1st January 2022. This will help the MMF segment grow and emerge as a big job provider in the country.

The Textiles & Apparel (T&A) industry was having long-pending (first under sales tax then, under VAT and finally under GST regime) demand for removal of inverted tax structure on manmade fibre (MMF) value chain. The GST on MMF, MMF Yarn and MMF Fabrics were 18%, 12% and 5% respectively. The taxation of inputs at higher rates than finished products created a build-up of credits and cascading costs. It further led to the accumulation of taxes at various stages of the MMF value chain and the blockage of crucial working capital for the industry.

Related Article…

[pt_view id=”baa39696xe”]

Though there is a provision in GST law to claim the unutilised Input Tax Credit (ITC) as a refund, there were other complications and resulted in more compliance burden. The inverted tax structure caused an effective increase in the rate of taxation of the sector. The world textiles trade has been moving towards MMF but India was not able to take advantage of the trend as its MMF segment was throttled by an inverted tax regime.

This 12% uniform GST rate is likely to contribute positively to the growth of the sector in the following ways:

i) The uniform rate of 12% for the entire value chain of the MMF textiles sector will be benefiting and save a lot of working capital. It will reduce the compliance burden of the industry players. This is a welcome step by the Government with no inversion.

ii) The uniformity of GST rates will be helpful to resolve the ITC residues that accumulated due to the inverted tax structure earlier.

The impact of the new I-T Annual Information Statement on taxpayers

iii) The uniformity in the GST rates shall be 12% GST on job work related to dying and printing services will benefit the industry to absorb and recover unutilised ITC.

iv)The significant portion of MMF products (output) is expected to be exported, it will lend a better scope for encashing the unutilised ITC. Also since tax on input will get refunded, on output (export) which will be zero-rated, it would not add to cost and make exports competitive.

v) Uniform 12% GST will help the industry having a huge portion of piled up opening ITC by enabling them to encash the same progressively.

Differential rates for garments create problems in compliance with the tax regime. MMF garments cannot be identified easily and cannot be taxed differently, hence there is a need for a uniform rate. 

Uniform rate makes it simple and since there is so much high potential of value addition in the garment segment that the increase in rate is likely to be absorbed in value addition. It will provide clarity to the industry and settle, once and for all, the issues caused by the inverted tax structure.

Have you submitted your tax return? Here’s how to double-check it.

Have you submitted your tax return? Here’s how to double-check it.

The filing and submission of income tax returns is only the beginning of tax preparation (ITR). The final stage in the process is to verify the ITR within 120 days of submitting it; otherwise, the ITR would be considered invalid.

Net banking:

Go to the e-verify page on the e-filing portal. Select the bank with whom you have active net banking under the net banking option. You will be transported to the bank’s net banking page. To finish the process, select the e-verify option after logging in.

OTP based on Aadhaar:

This approach is available under two conditions. The first is that your PAN must be linked to your Aadhaar number, and the second is that your Aadhaar number must be linked to an active mobile number. If you meet the two requirements, go to the e-verify page and select the’verify using OTP on mobile’ option.

Related Article…

[pt_view id=”baa39696xe”]

Account number:

The bank account that has been pre-validated on the e-filing site can be used to produce an Electronic Verification Code (EVC). If you’re expecting an IT refund, you’ll need to pre-validate your bank account. When you choose to e-verify with a bank account, an EVC is delivered to the mobile number associated with the pre-validated bank account.

Demat account:

This option is only available to taxpayers who have a pre-validated and EVC-enabled demat account on the e-filing site. These are completed prior to the submission of ITR returns. EVC is sent to the mobile number and email address associated with your demat account when you choose this option.

Bank ATM:

Only seven banks—Kotak Mahindra Bank, Central Bank of India, Canara Bank, ICICI Bank, State Bank of India, IDBI Bank, and Axis Bank—allow e-verification via ATM card. If you have a bank account with any of these banks and your PAN is linked to it, go to an ATM and use the ATM card to generate EVC. To finish the verification process, go to the e-verify website and pick the ‘I already have an EVC’ option.

How to Fill Out a Tax File Declaration for Your Employer

Receipt of Speed Post acknowledgement:

Posting a self-attested copy of the ITR acknowledgement receipt to the Centralised Processing Centre (CPC) office in Bengaluru is the sole physical way to validate returns.

To obtain an ITR-V receipt, go to the e-filing portal’s ‘view returns/forms’ option, choose the current assessment year’s acknowledgement number, and then download the ITR-V document. Enter your PAN and date of birth as a password to gain access.

Only mail or speed mail a hard copy of the ITR-V to CPC, Post Box No. 1, Electronic City Post Office, Bengaluru 560100, Karnataka. The option of using a courier is not accessible.

India expected to introduce a bill on cryptocurrency

India expected to introduce a bill on cryptocurrency.

According to reports, India is preparing to introduce the much-discussed cryptocurrency bill either before or during the upcoming parliament session. The bill is expected to be introduced during the upcoming union cabinet meeting, with the winter session beginning on November 29.

New regulations on crypto assets, their classification, and projected tax earnings from them are included in the aforementioned cryptocurrency bill. If the bill receives cabinet approval, it might be passed during the next parliament session. According to previous reports, the government may regulate cryptocurrencies as an asset class and prohibit their usage as a payment method.

Cryptocurrency investors are rushing to get tax guidance.

According to a prominent government official, the new legislation will include taxes on crypto earnings based on current capital gains standards. Tarun Bajaj, the Revenue Secretary, clarified the taxation of crypto assets, saying,

Related Article…

[pt_view id=”baa39696xe”]

“We’ll pick up the phone.” People are already paying taxes on it, as far as I’m aware. We’ll see whether we can actually put in some revisions to the law now that it has grown so much. However, that would be a budget-related task. We’re getting close to the Budget, so we’ll have to look into it then.”

For nearly four years, the Indian crypto industry has thrived amid regulatory uncertainty. According to one report, India’s cryptocurrency ecosystem has grown to a $6 billion sector, with several new unicorns. The Indian crypto industry could reach new heights now that the government appears to be on track to clear crypto rules.

The Reserve Bank of India is still sceptical of cryptocurrency.

The Reserve Bank of India (RBI), India’s central bank, is still wary of the usage of digital assets, warning that it could disrupt the financial system. Shaktikanta Das, the governor of the Reserve Bank of India, has issued a warning about the potentially devastating impact of digital assets on macroeconomic and financial stability.

The RBI also implemented the infamous banking ban in 2017, which suffocated the crypto sector and produced numerous misconceptions among the general public. The restriction on banking was later repealed by India’s Supreme Court in 2019.