46th Indian GST Council meet: Textile GST hike deferment on the cards?

The meeting will be an extension to the pre-budget meeting with state finance ministers on December 30, according to Indian media reports.

The Indian government had announced that GST rate on fabrics will increase to 12 per cent from 5 per cent and that on apparel of any value will go up to 12 per cent, compared to earlier when pieces priced up to ₹1,000 were subject to 5 per cent GST. It also announced uniform GST rate of 12 per cent on manmade fibre (MMF), MMF yarn, MMF fabrics and apparel to address the inverted tax structure in the MMF textile value chain. The changed rates are slated to come into effect from January 1, 2022.

Up until now, the GST levied on MMF, MMF Yarn and MMF Fabrics were 18 per cent, 12 per cent and 5 per cent, respectively. The taxation of inputs at higher rates than finished products created build-up of credits and cascading costs. It further led to accumulation of taxes at various stages of MMF value chain and blockage of crucial working capital for the industry, as per the government.

Following the announcement, handlooms and textiles unit owners from different parts of India have been demanding the withdrawal of the increase in GST rate. However, Sitharaman had rejected the proposal put forward by the ministry of textiles to defer the GST increase at a meeting held last week. A similar request from the Confederation of All India Traders (CAIT) was also rejected.

The council is also likely to hear demands for merging the 18 per cent and 12 per cent tax slabs as well as for removing certain products from the exempt category to increase revenues.

Fibre2Fashion News Desk (KD)