what to do for gst

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bishnu kumar didwania (Querist)
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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.

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)
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21 June 2017 You have to register under GST. You can opt for composition & pay tax @2% on turnover.

bishnu kumar didwania

bishnu kumar didwania (Querist)
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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?

bishnu kumar didwania

bishnu kumar didwania (Querist)
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21 June 2017 I couldn't understand.pl explain me please.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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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.

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