New GST rates on textile likely from January

Despite concerns expressed by the industry, the government is unlikely to defer implementation of higher Goods and Services Tax (GST) on certain textile products, as the decision was taken by the GST Council.

The new GST rates will kick in from January 1.

The sector had opposed the increase citing higher compliance costs, especially for the unorganised sector and micro, small and medium enterprises (MSMEs), besides making clothing more expensive for the poor.

The finance ministry is expected to take up with the GST Council the concerns raised by the industry over the latter’s decision to increase the rates on several textile products to 12%.

The Council had in its previous meeting held in Lucknow on September 17 decided to correct the inverted duty structure on footwear and textiles. After this, the GST on footwear and textiles was raised to 12%, effective January 1.

“The decision to implement from January 1 was taken by the Council after intense deliberations. We will place the representations before the Council whenever it meets next,” an official said.

Since the GST was raised by the Council, any decision on the rates or implementation also lay with it, the official added.

Once it kicks in, an apparel will attract 12% GST as against 5% on sale value of up to Rs 1,000 per piece currently. Similarly, the 5% tax on sale value of up to Rs 1,000 per pair of footwear has been increased to 12%.

GST on woven fabric, sewing thread of man-made filaments, synthetic filament yarn other than sewing thread, synthetic monofilament, and artificial filament yarn including artificial monofilament, among others, have also been increased to 12% from 5% earlier. “Inverted duty structure broadly harms the sector as companies are unable to take credit of higher tax paid on inputs. It had to be corrected to help the industry,” the official said.

The government has said that uniform GST will aid in the resolution of input tax credit residues that got accumulated due to the inverted tax structure earlier.

It will enable the industry to encash piled-up input tax credit progressively, the textiles ministry said last month.

The Confederation of All India Traders said that any hike in GST rates on textiles will adversely affect consumers and block capital for small traders.

Sources said the textiles ministry had not taken up the issue with the finance ministry or the GST Council Secretariat yet.

“Industry has made a representation to the finance ministry and taken up the issues with them,” said another official.

(The one-stop destination for MSME, ET RISE provides news, views and analysis around GST, Exports, Funding, Policy and small business management.)

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