GST on textiles: States demand to put tax hike on hold in pre-budget meeting

Several states have flagged higher tax rate on textile products from January 1.

New Delhi: Ahead of the GST Council meeting, several states on Thursday flagged higher tax rate on textile products from January 1 and demanded that the rate hike be put on hold.

In the pre-budget meeting chaired by Union Finance Minister Nirmala Sitharaman, states like Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu said that they are not in favour of a hike in Goods and Services Tax (GST) rate on textiles to 12 per cent, from 5 per cent currently, with effect from January 1, 2022.

The 46th meeting of the GST Council, chaired by Sitharaman and comprising state FMs, is scheduled on December 31, with a single agenda to consider Gujarat's demand of putting the rate hike "decision on hold", as also representations received from trade in this regard.

Delhi Deputy Chief Minister Manish Sisodia said the move to raise GST on textiles from 5 per cent to 12 per cent is not people friendly and this should be withdrawn. If a common man buy clothes of Rs 1,000, he has to pay GST of Rs 120. "Delhi is not in favour of this," said Sisodia, who is also the Delhi Finance Minister.

Tamil Nadu Finance Minister P Thiaga Rajan said, "It is one point agenda (for tomorrow's Council meet). It is an agenda that many states have raised. In the agenda item it says that it was raised by Gujarat but I know that many states raised it. .. It should be stalled (move to raise GST rate on textile)".

Rajasthan Education Minister Subhash Garg said the Friday's GST Council meeting is likely to be on rate hike on footwear and textiles and Rajasthan does believe that rate hike on textiles should be rolled back especially when countries like Bangladesh are giving us stiff competition in such sector.

The Council in its previous meeting on September 17 had decided to correct the inverted duty structure in footwear and textile sectors. With effect from January 1, 2022, all footwear, irrespective of prices, will attract GST at 12 per cent, and all textile products, except cotton, including readymade garments will have 12 per cent GST.

West Bengal's former finance minister and current advisor to state Chief Minister Amit Mitra had earlier urged the Centre to roll back a proposed hike in textile from 5 per cent to 12 per cent saying this would lead to closure of around 1 lakh textile units and 15 lakh job losses.

Telangana Industries Minister KT Rama Rao too had made a case for withdrawal of its proposed plan to increase GST rates. Also Read: Swiggy, Zomato orders to cost more from Jan 1; check by how much your food orders could get expensive

Industry too has opposed the rise in tax from 5 per cent, citing higher compliance cost especially for the unorganised sector and MSMEs besides making poor man's clothing expensive. Also Read: Edible oil prices dropping consistently; better mustard seed crop to soften rates: Food Secretary