The goods and services tax (GST) council on Friday decided to defer the hike on textiles to 12% following objections from state governments and industry. The proposal intended to hike the GST rate on apparel 12% from 5% from 1 January 2022. The current GST rate of 5% in the textiles sector would continue beyond 1 January 2022.
Briefing media after the GST council meeting, finance minister (FM) Nirmala Sitharaman says, “A Committee under the convenorship of Karnataka chief minister (CM) Basavaraj S Bommai looks after the rate rationalisation of GST. In today’s meeting, it was decided that textiles will again be put before the committee along with other items. The committee will submit its report by February next year, and it would be circulated to all the members. The committee’s report will be discussed in the GST meeting in March.”
According to the minister, the textiles Industry felt that there could be a temptation not to enter the formalised system. “The immediate pressure could mean that some may go into the informal way of doing business,” she says.
The 46th meeting of the GST council was a brief meeting with only one agenda item—to reconsider the decision taken during by the council in September 2021. The meeting was triggered by a letter sent by the finance minister of Gujarat to Ms Sitharaman, the Union finance minister.
“The September 2021 decision was taken more in the process of correcting inversion in the tax structure. Since 2019, the GST council has considered such correction in the inverted duty structure in approximately 10 items,” she added.
According to Bimal Jain, Chair of IDT (indirect taxes) Committee PHDCCI, the postponement will give the sector much-needed impetus and support. “A large number of small and medium scale taxpayers were worried about the proposal to hike GST rates. This decision of the GST council is in the right direction. It is advisable to build confidence among traders before hiking GST rates in future.”
Confederation of All India Traders (CAIT) has also hailed the decision. Furthermore, the Confederation urged postponement of the decision to increase the GST rate on footwear.
Additionally, the Confederation said that it has been more than four years since the implementation of GST and till now, GST has not become a stable tax system. “GST portal is also not working properly. Contrary to expectations, GST has turned out to be a very complex tax system due to huge anomalies in the tax system,” CAIT says in a statement.