GST hike: Shoes to pinch, textiles spared

Tribune News Service

New Delhi, December 31

The GST Council recommended a stay on the Centre’s decision to increase the tax rate on cheaper textiles from 5 per cent to 12 per cent from January 1, said Union Finance Minister Nirmala Sitharaman at a press conference here on Friday.

The proposal effectively puts on hold Commerce Minister Piyush Goyal’s announcement last month of a uniform tax across the entire textiles sector from January 1 to reduce the compliance burden. Currently, the tax rate on manmade fibre (MMF) is 18 per cent, MMF yarn 12 per cent and fabrics 5 per cent. “The textile industry felt there could be a temptation not to come into the formalised system. The immediate pressure could mean that some may go into the informal way of doing business,” said Sitharaman. A group of state finance ministers, looking at the GST rate rationalisation, will now examine this issue. It has been asked to submit its report to the council by February. Sitharaman said a similar demand for footwear was not accepted. From January 1, all footwear, irrespective of prices, will be taxed at a uniform rate of 12%.

Vivek Jalan, partner, Tax Connect Advisory, said GST hike on textiles would have been detrimental to almost one crore wholesalers and retailers.

New tax rate on textiles by Feb

• The GST Council has put on hold a decision to hike tax rate on textiles to 12%
• The matter has been referred to a group of state ministers to suggest rate by February
• The move came after states made a request for deferring the rate hike from 5% to 12%