GST rate hike on textiles put on hold

New Delhi: The GST Council on Friday decided to defer the hike in the rate of goods and services tax (GST) on textiles from 5 per cent to 12 per cent, Union Finance Minister Nirmala Sitharaman announced. The GST hike on textiles was to come into effect from Saturday.

While addressing a press conference after the Council meeting, Sitharaman said the meeting was called on an emergency basis, triggered by a letter from the Gujarat Chief Minister - which sought reconsideration of the September 2021 decision on the inversion duty structure for textiles. Sitharaman said the group of ministers (GoM) has been given time till February 2022 to consider the rate rationalisation for textiles. The committee will submit a report in the same month, after which the GST Council will meet in March 2022 and take the final call.

Many States had objected to the higher tax rate on textile products and demanded that the rate hike be put on hold. The matter was raised by States like Telangana, Gujarat, West Bengal, Delhi, Rajasthan, and Tamil Nadu - which were against the hike in GST rate on textiles to 12 per cent, from five per cent. The issue came up for discussion during the Union Finance Minister's pre-budget consultations with her counterparts from the States. Delhi Deputy Chief Minister Manish Sisodia said the Delhi government will protest against the proposed tax hike on textiles. The minister stated that the textile traders are opposing the increase in GST rates and their demands are justified, so the Aam Aadmi Party (AAP) government shall take them forward. West Bengal's former finance minister Amit Mitra had urged the Union Finance Minister to roll back the proposed hike in textile saying that it would lead to the closure of around one lakh textile units and 15 lakh job losses.

Industry bodies had also opposed the rise in tax from five 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.

Earlier in the year, the Central Board of Indirect Taxes and Customs (CBIC), on the recommendations of the GST Council, had announced that the GST rate on garments, textiles, and footwear would be raised from five per cent to 12 per cent with effect from January 1, 2022.

The 46th meeting of the GST Council was held in the national capital on Friday, where the Finance Ministers of States and Union Territories and senior officials attended the meeting.