Before founding Sprinter Private Limited, Mr. Aditya P. had a distinguished career in the textile industry, working for over two decades in a…

Before founding Sprinter Private Limited, Mr. Aditya P. had a distinguished career in the textile industry, working for over two decades in a leading multinational corporation. Starting as an entry-level employee, he rose through the ranks due to his expertise in manufacturing, international trade, and operational management. His experience gave him deep insights into the textile market, both domestically and globally. With a vision to build a brand of his own and tap into the booming textile exports market, Mr. Aditya ventured into entrepreneurship. He brought with him not just years of industry knowledge but also an entrepreneurial spirit, leading to the incorporation of Sprinter Private Limited in May 2023. Sprinter Private Limited’s Journey Incorporated in May 2023, Sprinter Private Limited has quickly made significant strides in the textile industry. Headquartered in New Delhi, the company embarked on the construction of a state-of-the-art factory building in NOIDA using prefabricated structure, which is common and prevalent in modern times. The building, comprising about 1,00,000 square ft. of covered area, was ready to use by the end of July 2023 at a cost of 6.50 crores. The company also obtained GST registration the state of Uttar Pradesh in May 2023. In anticipation of launching production quickly, the company had placed advance orders for new textile machinery from South Korea, costing - 8.65 crores. Additionally, it planned to install previously used indigenous machinery valued at 2.00 crores. By the first week of August 2023, both imported and indigenous machinery were brought at the NOIDA premises, enabling Sprinter to kick-start commercial production of textile made-ups by September 1, 2023. The early success of Sprinter’s made-up textiles became evident when they quickly gathered attention in the U.S. market. Operating under the “Sprinter” brand, the company skillfully leveraged digital and online marketing platforms to secure export orders, effectively competing with and surpassing Chinese rivals in terms of quality and innovation. The company’s strategic focus on digital outreach helped it capture a significant chunk of the export market, further fueling its rapid growth. To further optimize its operational efficiency, in February 2024, Sprinter outsourced 20% of its production to factories in countries with lower operational costs. These factories cater exclusively to Sprinter’s procurement demands but operate independently, with no direct involvement from Sprinter. Products from these suppliers are stored at Sprinter’s distribution centers and dispatched for sales as needed. The company’s rapid production ramp-up, combined with Managing Director Mr. Aditya’s strategic vision, and its successful penetration of international markets, led to significant profitability during the financial year 2023-24. This success reflects Sprinter’s ability to swiftly scale operations, utilize cost-effective solutions, and establish a strong foothold in the global market. Sprinter Private Limited’s mission is to become a globally recognized textile brand by delivering innovative, high-quality products, while maintaining integrity and placing sustainability at the forefront of its operations. The company’s vision is to lead the global textile industry by setting new standards in quality, innovation, and ethical practices, ensuring sustainable growth and contributing positively to the community. Sprinter’s long-term goals include achieving global market leadership by expanding into key international markets, sustaining 20% annual growth while maintaining operational excellence, investing in cutting-edge technology and research for continuous innovation, and ensuring ethical supply chain practices by maintaining transparency across operations. GST Compliance Challenges During the fiscal year ended March 31, 2024, Sprinter achieved an impressive export turnover of 50 crores. The company opted to export with the payment of IGST and benefited from duty drawbacks, amounting to 2.00 crores, credited to its statement of profit and loss. By the end of the year, Sprinter’s financial statements reflected a net profit before tax of 7.50 crores. Additionally, the company invested 10 lakhs in research and development, further strengthening its innovative edge in the market. Despite its commercial success, the company’s in-house GST team faced challenges in navigating GST liability on IGST payments and refunds, particularly concerning the export sales that began in Oct 2023. The made-ups valuing 5 crores were exported during Oct 2023, carrying a GST rate of 5%. The break-up of ITC for month of Oct 2023 is as under: Eligible ITC on inputs 0.15 crores Eligible ITC on capital goods 0.03 crores Eligible ITC in input services 0.02 crores There were divergent opinions among team members pertaining to discharge of tax liability and refund issues given below before they could approach their tax consultant. Opinion I - The overall IGST liability of the company pertaining to supplies in relation to export in Oct 2023 is 0.25 crores and it would be discharged by the company by availing ITC on inputs of 0.15 crores and balance of 0.10 crore would be discharged by company in cash. After discharge of liability and filing of periodical returns consisting of GSTR-3B and GSTR-1, the above said amount of 0.25 crore would be refunded/refundable directly by customs in bank account of company. Opinion II - The overall IGST liability of the company pertaining to supplies in relation to export in Oct 2023 is 0.25 crores and it would be discharged by the company by availing ITC on inputs of 0.15 crores, ITC on capital goods of 0.03 crore and ITC on services of 0.02 crores and balance of 0.05 crore would be discharged by company in cash. After discharge of liability and filing of periodical returns consisting of GSTR-3B and GSTR-1, the above said amount of 0.25 crore would be refunded /refundable directly by customs in bank account of the company. Opinion III - The overall IGST liability of the company pertaining to supplies in relation to export in Oct 23 is 0.25 crores and it would be discharged by the company by availing ITC on inputs of 0.15 crores, ITC on capital goods of 0.03 crore and ITC on services of 0.02 crores and balance of 0.05 crore would be discharged by company in cash. After discharge of liability and filing of periodical returns consisting of GSTR-3B, GSTR-1, and GSTR-9, the above said amount of 0.25 crore would be refunded/refundable directly by customs in bank account of the company. Opinion IV - The overall IGST liability of the company pertaining to supplies in relation to export in Oct 2023 is 0.25 crores and it would be discharged by the company by availing ITC on inputs of 0.15 crores, ITC on capital goods of 0.03 crores and ITC on services of 0.02 crores and balance of 0.05 crore would be discharged by company in cash. After discharge of liability and filing of periodical returns consisting of GSTR-3B and GSTR-1, the above said ITC amounting to 0.20 crore would be refunded/refundable directly by customs in bank account of the company. The GST team’s uncertainty highlighted the complexities of navigating export-related tax laws. Capital Investments and Other Costs The company imported machinery worth - 8.65 crores from South Korea, with the cost being CIF at Mundra port. However, the company incurred - 2.36 lakhs as clearing charges paid to DK Services Private Limited (including - 0.36 lakhs on account of IGST) for availing services for getting consignments cleared from port. Further, the company incurred - 3.00 lakhs for freight services, paid to D Transport Services, a proprietary concern that is not registered under GST and owning 15 goods carriage. As a result, the company deposited - 0.15 lakhs in IGST under the reverse charge mechanism. Moreover, the company paid - 1.77 crores to another company providing building construction services during the financial year 2023-24, which included 27 lakhs of IGST. Rapid Growth and Strategic Leadership Under Mr. Aditya Under the visionary leadership of Mr. Aditya, Sprinter Private Limited has rapidly established itself as a competitive force in the textile industry. The company’s early success in penetrating the U.S. market, combined with its strategic investments in modern infrastructure, innovative marketing approaches, and capital expansion, has paved the way for sustained growth. Despite facing some challenges in GST compliance, Sprinter’s strong performance and rapid export expansion reflect Mr. Aditya’s entrepreneurial acumen, strategic foresight, and unwavering determination to drive the company forward. ANNEXURE The New AgeSprinter Faces Scrutiny Over Child Labour and Unethical Practices in Overseas Supply Chain Recent reports from several Third World countries have uncovered alarming instances of child labor within factories linked to global supply chains, including those associated with Sprinter, a leading global apparel brand. Despite child labor being illegal in these nations, it has been reported that factories outsource work to contractors who, in turn, illegally hire children, bypassing local law enforcement. Although Sprinter itself has not directly engaged in these practices, acting only as a customer for these factories, its lack of initial intervention has drawn criticism. Working conditions in many of these factories are described as unhygienic and oppressive, with the exploitation of vulnerable workers being a widespread issue. Nature of Compliances Appropriate response of company in accordance with law (1) Deduction of TDS under income tax law and availing of eligible ITC under GST law (i) TDS of 3,07,000/- is deducted on account of above three transactions and company is availing ITC of 51,000/- in respect of these transactions (2) Deduction of TDS under income tax law and availing of eligible ITC under GST law (ii) TDS of 2,30,250/- is deducted on account of above three transactions and company is availing ITC of 36,000/- in respect of these transactions (3) Deduction of TDS under income tax law and availing of eligible ITC under GST law (iii) TDS of 2,30,250/- is deducted on account of above three transactions and company is availing ITC of 27,51,000/- in respect of these transactions (4) Deduction of TDS under income tax law and availing of eligible ITC under GST law (iv) TDS of 3,07,000/- is deducted on account of above three transactions and company is availing ITC of 27,36,000/- in respect of these transactions