There are some possible consequences of GST on various raw materials, fabrics and garments. The 18 per cent service tax on job working activities such as knitting, cutting, weaving and packaging could hurt small textile units badly. Integrated textile units, which do the job working internally will not be impacted.

GST of 18 per cent on manmade fibers will have considerable negative impact on manmade fiber manufacturing companies.

Subsuming of countervailing duty in GST for garments and fabrics will result in intense competition from companies in Bangladesh and Sri Lanka.

GST will be capped at 12 per cent on garments priced above Rs 1000 and at five per cent on garments below Rs 1000.

Companies that sell garments below Rs 1000 will see cost savings of two or three per cent while those selling garments above Rs 1000 may report a two or three per cent increase in costs.

Though there is no excise tax on readymade garments, the industry was still paying VAT of 5.5 to six per cent and 7 to 7.5 per cent for garments above Rs 1000. The difference in tax rate will get offset, more or less, by embedded tax credit.

The industry’s value chain, which is extremely fragmented at present, will benefit from a uniform tax rate across all verticals.