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India: Gujarat to Impose 5% Tax on Technical Textiles

India’s Gujarat government’s finance minister, Saurabh Patel announced last week in a state budget presentation that the government will impose a 5 percent Value Added Tax (VAT) on technical textiles.

The tax is estimated to increase the state’s tax revenue by about Rs 80 crore ($800 million), according to Business Standard

Technical textiles are used in many industries including, building construction, civil engineering, furniture, household textiles, floor coverings, automobiles, shipping, railways and packaging. The raw materials used in its manufacturing are artificial materials like plastic, nylon, resins, rubber and metal, meaning significant value addition for technical textile products, and Patel noted that it was necessary to bring the product sector into the tax net.

All other types of fabrics used for garments and domestic use will remain exempt from tax in the state.

Patel also proposed a refund of the tax paid on the existing 5 percent cotton roving tax to promote the use of the hand-woven cloth, khadi, and to eliminate the tax burden on the purchase of cotton roving used to manufacture khadi. The finance minister said this would reduce Gujarat’s tax revenue by about Rs 1 crore ($10 million).