The 46th Goods and Services Tax (GST) Council has unanimously decided to defer the proposed hike in GST on textiles from 5 per cent to 12 per cent. The matter will be discussed again in the next Council meet for future roadmap. The decision came today in a meeting chaired by Finance Minister Nirmala Sitharaman amid objections from states and the industry.
The GST rate increase was to come into effect from January 1, 2022. On December 30, several states flagged higher tax rate on textile products from January 1 and demanded that the hike be put on hold. In the pre-budget meeting chaired by Sitharaman, states like Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu said that they are not in favour of such a hike.
The GST Council in its 45th meeting in September had recommended making certain rate changes for footwear and textiles to correct the inverted duty structure.
GST Council has decided to defer the hike in GST rate on textiles (from 5% to 12%). The Council will review this matter in its next meeting in February 2022: Bikram Singh, Industry Minister, Himachal Pradesh on GST Council meeting in Delhi pic.twitter.com/3BM4MJxeFJ
— ANI (@ANI) December 31, 2021
In November, the Finance Ministry notified a uniform 12 per cent rate for manmade fibre (MMF), yarn, fabrics and apparels, along with a 12 per cent uniform rate for footwear. The rate hike was notified to be made effective from January 1.
At present, tax rate on manmade fibre, yarn and fabrics is 18 per cent, 12 per cent and 5 per cent, respectively. Apparel and clothing up to Rs 1,000 per piece currently attract 5 per cent GST. Synthetic and artificial yarn have been changed to 12 per cent but natural yarn like cotton, silk, wool yarn are still in 5 per cent slab.
Opposing the hike, West Bengal’s former finance minister Amit Mitra had urged the Union finance minister to roll back the proposed hike saying that it would lead to the closure of around one lakh textile units and 15 lakh job losses.
In a tweet, Mitra said:
Modi Govt will commit another BLUNDER on Jan 1st. By raising GST on Textiles,5% to 12%, 15 MILLION JOBS WILL BE LOST & 1 lakh units will CLOSE. Modi ji, CALL a GST COUNCIL MEETING NOW & REVERSE DECISION before SWORD OF DAMOCLES FALLS ON HEADS OF MILLIONS OF COMMON PEOPLE.
— Dr Amit Mitra (@DrAmitMitra) December 26, 2021
Industry bodies had also opposed the rise in tax to 12 per cent, citing higher compliance costs especially for the unorganised sector and micro small and medium enterprises (MSMEs) besides making the poor man’s clothing expensive.
The Delhi government supported the protest of traders against the GST hike saying it would raise the issue in GST council meeting.
In a tweet, deputy Chief Minister Manish Sisodia said:
“The protest by textile traders against hike in GST from 5 per cent to 12 per cent is justified. The AAP and Delhi government under leadership of Arvind Kejriwal have been in favour of keeping the tax rates low. I will demand keeping tax on textile low in the GST Council meeting tomorrow [December 31].”
The 46th meeting of the GST Council was held in the national capital on Friday with Finance ministers of States and Union Territories and senior officials in attendance.
Union ministers of state in the Ministry of Finance, Pankaj Chaudhary and Bhagwat Kishanrao Karad, besides the senior officials in the Ministry of Finance, also attende the meeting.
The meeting holds significance as it is taking place ahead of the Union Budget for 2022-23, which is scheduled to be presented in Parliament on February 1, 2022.