Relief to Textile Sector & MSMEs

To resolve the issues and challenges faced by the

Textile sector and Micro, Small and Medium Enterprises (MSMEs), Union Minister for MSME, Shri. Nitin Gadkari pointed out the measures taken by the government to uplift both the sectors.

Setting the Goal for MSMEs

He stated that the GoI aiming to reach the 5 trillion dollar economy and to increase the GDP from 29% to 50%. To achieve the same, the

MSMEs will receive flawless support, as it acts as the backbone of the Indian economy and force to increase employment, growth and exports. He also said that the clusters, small-scale industries and research facilities would be set up to reduce the import bill, increase employment and rural economy and manufacture the goods that need to be imported.

Swift Actions from GoI

Addressing the key issues of the Textile Industry and MSMEs, Shri. Nitin Gadkari pointed out the following measures carried out by the government. They are:

Tax Burden and Compliance:

Corporate Tax: In the Financial Year 2016-17, the government reduced the corporate tax to 25 per cent for companies with a turnover of up to Rs.250 crores (covering 99 per cent of the domestic companies). For the Financial Year 2019-20, the government has proposed to increase the turnover slab to Rs.400 crores vide Finance (No.2) Bill, 2019. Presumptive taxation: The threshold limit for applicability of presumptive taxation of business income has been increased from 1 crore to 2 crores. For individuals and HUF (income): The threshold limit for maintaining the books of accounts part for individuals and HUF has been increased from 1.2 lakh to Rs.2.5 lakhs. For individuals and HUF (total turnover): The threshold limit for maintaining the books of accounts part for individuals and HUF has been increased from 10 lakh to 25 lakhs. Rebate for individuals and HUF: Rebate for individuals and HUF on Income tax has been provided on a total taxable income up to Rs.5 lakhs. Section 80JJAA: The government has relaxed the employment requirement from 240 days to 120 days for seasonal manufacturers in apparel. Reduction in GST Rates for Textiles Industry Addressing the issues raised by the Textile Industry and Traders Associations to reduce GST rates on textile items, the Ministry of Finance has provided the following measures

The government has decreased the GST rate of yarn, fabric garments and made-ups from 18% to 5%
The government has decreased the GST rate of Handicraft items from 18% to 5%
The government has decreased the GST rate of Corduroy, Velvet fabrics and other 8 items from 12% to 5%
To create a competitive market nationally and internationally, the government allowed refund ITC on fabrics from FY 2018. This was revised from the previous MMR structure of 18% on fibre, 12% on yarn and 5% of fabric leading to a stranding 2 % tax.

The press release on the same is inserted below:

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Frequently Asked Questions

Common questions about Relief Measures for Textile Sector and MSMEs in India.

The government has taken several measures to reduce the tax burden and compliance for MSMEs. It has reduced the corporate tax to 25% for companies with a turnover of up to Rs. 250 crores, covering 99% of domestic companies. The threshold limit for presumptive taxation of business income has been increased from Rs. 1 crore to Rs. 2 crores. The threshold limit for maintaining books of accounts has also been increased for individuals and HUFs.

The government has provided relief to the textile industry by reducing the GST rates on various textile items. The GST rate on yarn, fabric, garments, and made-ups has been decreased from 18% to 5%. The GST rate on handicraft items has been reduced from 18% to 5%. Additionally, the GST rate on corduroy, velvet fabrics, and eight other items has been decreased from 12% to 5%.

The government aims to reach a $5 trillion economy and increase the GDP contribution of MSMEs from 29% to 50%. MSMEs are considered the backbone of the Indian economy and a driving force for employment, growth, and exports. The government plans to provide flawless support to MSMEs to achieve this goal.

To create a competitive market for the textile industry nationally and internationally, the government has allowed the refund of Input Tax Credit (ITC) on fabrics from the Financial Year 2018. This was revised from the previous structure, which led to stranding 2% tax on fabrics.

The government has relaxed the employment requirement from 240 days to 120 days for seasonal manufacturers in the apparel industry under Section 80JJAA. This measure aims to provide relief to seasonal manufacturers in the textile sector.

The government plans to set up clusters, small-scale industries, and research facilities to reduce the import bill. These initiatives are aimed at increasing employment, boosting the rural economy, and manufacturing goods that need to be imported currently.

The government has provided a rebate on income tax for individuals and HUFs with a total taxable income of up to Rs. 5 lakhs. Additionally, the threshold limit for maintaining books of accounts has been increased from Rs. 1.2 lakhs to Rs. 2.5 lakhs for individuals and HUFs.

The reduction of corporate tax to 25% for companies with a turnover of up to Rs. 250 crores covers 99% of domestic companies. This measure aims to provide tax relief and encourage growth for a vast majority of Indian companies, including MSMEs.

The government has decreased the GST rate on handicraft items from 18% to 5%. This measure is expected to provide relief to the handicraft industry, which is an important part of the textile sector and a significant source of employment and income.

The government plans to set up research facilities to support MSMEs. These research facilities are expected to contribute to reducing the import bill, increasing employment, boosting the rural economy, and promoting domestic manufacturing of goods that are currently being imported.