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The Finance Ministry has notified the various GST duty changes approved by the GST Council in September so as to correct the inverted duty structure in footwear and textiles sector from January 1 next year.
With this move, all footwear irrespective of their prices and most textile products including readymade garments will attract goods and services tax (GST) rate of 12 per cent from January 1.
An uniform rate of 12 per cent GST would mean that prices of footwear that were earlier subjected to 5 per cent GST for products priced below ₹1,000 would go up from January 1 next year . However, a single uniform rate would help industry as regards getting refunds and will simplify the framework and resolve confusion in the sector, a footwear industry observer said.
An inverted duty structure is a situation where inputs attract a higher duty than the one applicable on finished goods. This most often results in cash flow problems for industry as the higher amount of duty paid on inputs remains unutilised or blocked.
Besides increase in GST tax rate on footwear and textile products with sale value not exceeding ₹1,000, the Finance Ministry has also rationalised the tax rate on various raw materials used in manufacture of textiles articles. With effect from January 1 next year, such raw materials will be taxable at 12 per cent instead of multiple tax rates ranging from 5 per cent to 18 per cent.
Prior to the latest GST rate change, the duty rate that was applicable on footwear depended on the pricing of the item. It was 5 per cent for products with value up to ₹1,000 per pair. Footwear priced above ₹ 1,000 per pair attracted a GST of 18 per cent.
E-commerce operator
E-commerce operator would from January 1 next year be liable to pay GST on supply of restaurant services, if such services are supplied through its platform, except in case of restaurant services supplied from luxury hotels (having declared tariff of any unit of accommodation not less than ₹7,500 per day). The Finance Ministry has now issued a notification for this purpose.
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