GST rate hike for textiles sector deferred

BL New Delhi Bureau | | Updated on: Dec 31, 2021
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GoM to look into duty structure on textile along with overall rate rationalisation

The GST Council, under the Chairmanship of Finance Minister Nirmala Sitharaman, on Friday deferred the implementation of the new taxation regime for textiles that was to come into effect from January 1. However, footwear will be come under the new GST regime from Saturday.

With the GST plan put on hold, prices for garments with MRP (Maximum Retail Price) up to ₹1,000 will not see any price revision on account of GST. However, footwear with MRP up to ₹1,000 will attract GST of 12 per cent as against 5 per cent. Footwear prices can go up.

The textile issue was referred to a panel of State ministers to recommend a new rate by February.

The Finance Minister said that immediately after the Council’s decision in September to correct the duty inversion in textiles, representations started pouring in. She made a specific reference to a letter from the Gujarat Finance Minister.

“From December, representations started coming. On December 29, a letter came from the Gujarat FM. Therefore, the emergency meeting. The decision of the emergency Council meeting today is that we retain the status quo and not go to 12 per cent, from 5 per cent, meaning don’t do the correction now in case of textiles,” she said.

Sitharaman said States had flagged the need for long-term measures to correct duty inversion and revenue generation.

“The decision of the Council was that the rate rationalisation committee would also look at textiles, and submit the report by February which I agree to have it circulated to all ministers, and post that to hold either in end February or some time in March a Council meeting in which the committee’s recommendation or report will be discussed,” she said.

Price rise, the push

Stating that every State agreed that there is a duty inversion in textiles and the need to correct it, Sitharaman said: “The overriding push” was probably because a certain segment of the textile industry felt it would immediately cause an increase in the price. “That is why it has gone back to the committee to do a more in-depth study and come and present it to the Council,” she said, adding there are many complexities in taxation of textiles.

Bimal Jain, Chair, Indirect Tax Committee of PHDCCI, said the decision will give much-needed impetus and support to the sector wherein a large number of small and medium scale taxpayers were worried over the impending hike in GST rates. However, Jain said footwear sector also needs support as the hike in GST rates will make footwear expensive for the common man.

Saket Patawari, Executive Director – Indirect Tax, Nexdigm, said that  as the rate revision was due  from Friday, wholesalers/retailers would have got pricing tags changed to reflect 12 per cent GST.

Published on December 31, 2021

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