GST Increases In Textile from 5% to 12%

The GST council has unanimously decided to postpone the increase in GST for textiles from 5% to 12,%, sources told CNBCTV- 18. This issue will be discussed again at the next board for future roadmaps. At its 46th meeting on Friday, the Goods and Services Tax Council (GST) decided to postpone the proposed increase in the textile sector tax rate, which should take effect from January 1, from 5% to 12%.

The GST tax rate for textiles will be maintained immediately, and the Ministerial Committee will consider the tax rate structure by February, Finance Minister Nirmala Sitharaman said after the meeting. On December 30, several states announced that they would raise the tax rate on textiles from January 1, calling for a suspension of the tax increase.

Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu are among those in favour of raising the Goods and Services Tax (GST) on textiles to 12% at a pre-budget meeting chaired by Federal Finance Minister Nirmala Sitharaman. Effective January 1, 2022, from the current 5%. ” During December … the representative came, on December 29, Gujarat FM sent a letter, and thus the emergency meeting took place. At today’s emergency council meeting, keep the status quo, 5% to 12 I decided not to make it%, which means that in the case of textiles, I’m not currently making any corrections, ” she said.

 Explanation – 12% GST Proposal, In November, the Ministry of Finance announced a flat rate of 12% for artificial fibres, yarns, fabrics and clothing. The rate hike was announced on January 1st.

 ” Many textiles have a strong reverse tax structure, so textiles were taken up at the last meeting. There is still a consensus that there is a reversal in textiles. There is already a committee dealing with tariff rationalization. The textile will be returned to the committee for review, ” said Nirmala Sitharaman.

She said most of the industry feels this has a negative impact. ” Textiles are a complex topic that includes many components, sub-branches, segments. At various stages, they are taxed on threads, fabrics, garments, etc. More objectivity to address this complex issue. Is necessary, ” says Nirmala Sitharaman.

The reverse tariff structure occurs when the output tax or final product is lower than the input tax, and in most cases produces a reverse accumulation of input tax credits that require a refund. The reverse tariff system provided the government with a source of income and urged the government to rethink the tariff system.

At the 45th meeting in September, the GST Council recommended making certain tariff changes on shoes and textiles to modify the reverse tariff structure. The meeting on Friday was held to discuss one item on the agenda, the change in tariffs on the textile sector. In November, the Ministry of Finance announced a flat rate of 12% for artificial fibres, yarns, fabrics and clothing, and a flat rate of 12% for shoes.

The tax increase was announced on January 1st. Currently, the tax rates for artificial fibres, yarns and fabrics are 18%, 12% and 5%, respectively. Many states and industry groups have expressed concern about raising textile rate hikes from 5% to 12%.

 Last week, West Bengal’s prime minister’s chief adviser, Amit Mitra, urged federal finance minister Nirmala Sitharaman to withdraw the proposed increase. He said the new wage system would close about 10,000 rupees of textile units nationwide and lose 150,000 rupees of employment. KT Ramarao, Telangana’s Minister of Industry, requested that the Centre withdraw the proposed plan to raise the GST tax rate. Gujarat wrote to the Federal Finance Minister that the decision to raise the GST tax rate on textiles from 5% to 12% could affect a large number of taxpayers working in the textile sector.

The state states that the textile sector claims that such a decision could have adverse effects that could lead to lower demand and a recession. Nirmala Sitharaman told Business Insider that there might be pressure for firms to move to an informal segment of the market rather than enter the formal system. The low end puts a strain on the buyer, but this is not intended.

 ” The textile traders’ protests against the 5% to 12% increase in GST are justified. Under the leadership of AAP and Arvind Kejriwal, the Delhi government said in favour of keeping tax rates low. Taxes should be kept low. ” “Mr Sisodia, who is also the Minister of Finance for the Government of Delhi, tweeted at tomorrow’s GST Council. A similar decision was made for mobile phones in 2019, but the finance minister said no decision was made on textiles at the time due to opposition from the state.

The Federation of All Indian Traders (CAIT) welcomed the decision and said it would provide relief to many domestic textile traders who have been under intense stress for over a month. Interestingly, Sitharaman revealed that no similar decision was made on shoes that had the same problem. The GST rate has been raised to 12% from January 1, 2022, from 5% of the retail price to a maximum of 1,000 rupees per pair for shoes.

Medicine prices

 It was also not clear if the council extended the GST cut for important COVID items, especially pharmaceuticals. At the last meeting, the GST Council extended the GST tax rate reduction for important COVID items until December 31st.

However, the extension included only medicines, not other medical devices. The tax rate on drugs used to treat cancer has also been reduced from 12% to 5%. At a meeting on June 12, the Board lowered the GST tax rate on many issues that are essential to tackling the pandemic. This includes essential medications, oxygen, oxygen generators and related equipment, diagnostic and testing equipment kits.

Items that have received price cuts include remdesivir, tocilizumab, medical oxygen, oxygen generators, ventilators, masks, COVID test kits, oxygen meters, finger disinfectants, burial ovens, ambulances, and temperature controls. This was the second face-to-face meeting of the Almighty Federal Agency in almost two years. The final face-to-face meeting of the GST Council was held in Lucknow in September 2021.

edited and proofread by nikita sharma