Textiles GST Increase: Ministries Differ As Industry Pushes Back

Increase in GST on Textiles, facing resistance from the industry.

The textile sector is opposing the government’s decision to raise the goods and service tax on textiles at a time when input costs are already rising. In addition, the two ministries concerned are not the same.

To remedy the inverted duty structure, the Finance Ministry decided on Nov. 18 to apply a flat 12 per cent tax on textile commodities such as manufactured fibre and completed goods starting Jan. 1, 2022, based on the recommendations of the 33-member GST Council.

At the moment, a 5% tax is payable on sales valued up to Rs 1,000 per piece.

According to the council, a unified tax rate will eliminate anomalies that arise when the tax rate on raw materials is greater than the tax on finished goods.

For example, inputs into man-made fibre fabrics (yarn and fibre) are subject to a GST of 12-18%, which is more than the 5% applicable to fabrics. This is referred to as an inverted duty structure.

The Confederation of All India Traders claimed it met with Union Textiles Minister Piyush Goyal, who has stated his opposition to the new indirect tax rates.

According to the apex merchants’ organisation, which represents eight crore traders and 40,000 trade associations, Goyal urged that “the status quo” be preserved and that modifications be made only after consultation with the textile ministry and industry stakeholders.

“Rationalization of GST’s inverted duty structure is critical, but a cautious approach is even more critical”,the textile minister said during the meeting, according to the CAIT.

Praveen Khandelwal, the organization’s Secretary-General, plans to meet Finance Minister Nirmala Sitharaman and state finance ministers, requesting that the scheduled raise be reversed.


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