what to do for gst
This query is : Resolved
21 June 2017
I am manufacturer of cotton/silk/linen etc fabrics n supply to WB export house n they export. I made whatever there buyer's need.my maximum turn-over is 50/70 lacs yearly.so what to do for gst.
21 June 2017
You have to register under GST. You can opt for composition & pay tax @2% on turnover.
21 June 2017
it means when I purchase yearns then pay tax 5% n sold to party'then also give 2% tax.why any body will do business?
21 June 2017
I couldn't understand.pl explain me please.
03 August 2025
Got it, you're a fabric manufacturer with turnover around ₹50-70 lakhs, supplying to an export house. You’re confused about how GST works here, especially about paying tax on purchases and sales.
Let me break it down simply:
1. GST Registration
Since your turnover is above ₹40 lakhs (threshold varies by state, but generally ₹40L for most states, ₹20L for NE states), you must register for GST.
2. Input Tax Credit (ITC)
When you buy yarn (raw material), you pay GST (say 5%). This is called input tax.
When you sell fabric, you charge GST to your buyer (say 5% or 12%, depending on fabric type).
Now, the key is Input Tax Credit:
The GST you paid on yarn (input) can be claimed as credit.
You can adjust this input tax credit against the GST payable on your sales.
So, you don’t pay tax twice. You pay tax only on value addition (i.e., sale price minus purchase price).
Example:
Yarn purchase: ₹1,00,000 + 5% GST = ₹1,05,000 (You pay ₹5,000 GST on purchase)
Fabric sale: ₹1,50,000 + 5% GST = ₹1,57,500 (You collect ₹7,500 GST on sale)
You will pay GST to government = ₹7,500 (output GST) - ₹5,000 (input credit) = ₹2,500 only.
3. Composition Scheme
Composition is for small taxpayers (turnover up to ₹1.5 crore).
Tax rate is 2% on turnover.
But composition dealers cannot claim ITC on purchases.
So, if you opt for composition scheme, you pay tax @ 2% on your total turnover but cannot claim back GST on inputs.
This may increase your cost if input GST is significant.
4. Exports
Supplies to export houses are considered zero-rated supplies under GST.
This means you do not charge GST on exports.
You can claim refund of GST paid on inputs used to make export goods.
What you should do:
Register under GST as a regular taxpayer, not composition, since you supply for export.
Maintain proper records of input GST paid on yarn.
Charge GST on domestic sales if any.
For exports, zero-rate the supply and claim input GST refund.
Let me break it down simply:
1. GST Registration
Since your turnover is above ₹40 lakhs (threshold varies by state, but generally ₹40L for most states, ₹20L for NE states), you must register for GST.
2. Input Tax Credit (ITC)
When you buy yarn (raw material), you pay GST (say 5%). This is called input tax.
When you sell fabric, you charge GST to your buyer (say 5% or 12%, depending on fabric type).
Now, the key is Input Tax Credit:
The GST you paid on yarn (input) can be claimed as credit.
You can adjust this input tax credit against the GST payable on your sales.
So, you don’t pay tax twice. You pay tax only on value addition (i.e., sale price minus purchase price).
Example:
Yarn purchase: ₹1,00,000 + 5% GST = ₹1,05,000 (You pay ₹5,000 GST on purchase)
Fabric sale: ₹1,50,000 + 5% GST = ₹1,57,500 (You collect ₹7,500 GST on sale)
You will pay GST to government = ₹7,500 (output GST) - ₹5,000 (input credit) = ₹2,500 only.
3. Composition Scheme
Composition is for small taxpayers (turnover up to ₹1.5 crore).
Tax rate is 2% on turnover.
But composition dealers cannot claim ITC on purchases.
So, if you opt for composition scheme, you pay tax @ 2% on your total turnover but cannot claim back GST on inputs.
This may increase your cost if input GST is significant.
4. Exports
Supplies to export houses are considered zero-rated supplies under GST.
This means you do not charge GST on exports.
You can claim refund of GST paid on inputs used to make export goods.
What you should do:
Register under GST as a regular taxpayer, not composition, since you supply for export.
Maintain proper records of input GST paid on yarn.
Charge GST on domestic sales if any.
For exports, zero-rate the supply and claim input GST refund.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- STCG....................................................
- Section 54F - Exemption on LTCG in 2026 for HP purchased in 2023
- Treatment of Pension ?annuity returns on PMVY
- AMOUNT RECEIVED UNDER COMPULOSRY ACQUISITION OF AGRICULTURAL LAND
- Sales return eway bill
- TAN for Partnership
- Free lancer income
- REGARDING GST LIABILITY/....
- CA IPCC Registeration in 2012, Is my registration Active or Expired
- GST ON DAMAGED GOODS
- Gst invoice numbering and delivery challan numbering
- Standard Deduction claim for EPFO Pension and ICICI Prudential Life Annuity
- Sales amount in Gstr1
- CG after sale of flat
- E Commerce GSTR1 & 3B how to file
- Nomination of Bank for refund in itr 2
- GST Cancellation without jurisdiction
- Legal Opinion on Registrar's Refusal to Investigate a Society for Non-Renewal and Non-Compliance
- GST Refund_RFD-01
- Form10BD was uploaded successfully without any Error but after 24 hours, Form10BE are not available
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
