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GST council decides to defer hike on textiles from 5% to 12%: FM Nirmala Sitharaman

By Priyanka Verma 
Updated Date

New Delhi: The 46th meeting of the Goods and Services Tax (GST) Council was held in the national capital under the chairmanship of Union Finance Minister Nirmala Sitharaman. Finance ministers of States and Union Territories and senior officials attended the meeting at Vigyan Bhawan in New Delhi. The meeting took place ahead of the Union Budget for 2022-23, which is scheduled to be presented in Parliament on February 1, 2022.

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“The GST Council meeting has decided to retain the status quo on GST rate on textile to 5 per cent and not raise it to 12 per cent. The issue of GST rate on textile will be sent to the tax rate rationalization committee which will submit its report by February,” said Sitharaman in a press briefing on Friday on the discussions made during the meeting.

Sitharaman said that the matter was brought up and the emergency meeting was called after the ministry received a letter from Gujarat finance minister Nitin Patel.

The matter will be discussed again in the next Council meet for future roadmap, headed by Karnataka chief minister Basavaraj Bommai.

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The Centre had notified states about the GST council meet on December 24, following which Opposition ruled governments had decided to bring up the issue in the meeting.

According to a government notification, all footwear, below Rs 1,000, were to attract GST at 12 per cent. On the other hand, all readymade textiles, except those made with cotton, were also to attract a GST of 12 per cent. Previously, these items were sold at 5 per cent GST rate.

State governments and traders bodies had been demanding a deferment of this hike, citing that a number of small businesses will be affected by this. They had also warned that the move will come as a bane to the poor, who will eventually not be able to afford clothing, which is one of the basic needs of life.

West Bengal’s former finance minister Amit Mitra has urged the Union finance minister to roll back a proposed hike in textile from 5 per cent to 12 per cent saying this would lead to closure of around one lakh textile units and 15 lakh job losses.

Telangana Industries Minister K T Rama Rao has also urged the Centre to withdraw its proposed plan to increase GST rates. Industry had also opposed the rise in tax from five per cent, citing higher compliance cost especially for the unorganised sector and MSMEs besides making the poor man’s clothing expensive.

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Traders organisations had been demanding a rollback of the Centre’s decision, saying that the price change will affect the poor drastically. They said that the new tax change will increase the prices of clothing, making the poor man face difficulties while buying clothes.

“The decision is extremely irrational and will impact the livelihood of small manufacturers, artisans and other sections,” apex traders body CAIT said in a letter to the government.

Many traders organisations across India have been staging protests in view of the Centre’s decision, which has now been deferred. Delhi deputy chief minister Manish Sisodia had on Twitter said that he will raise the issue with the council in the meeting. “Textile traders are opposing the increase in GST rates from 5% to 12%. Their demand is justified. The Aam Aadmi Party and the Delhi government under the leadership of @ArvindKejriwal have always been in favor of keeping the tax rates low. In the meeting of the GST council to be held tomorrow, I will raise the demand for keeping the tax on clothes low,” he had tweeted on December 30.

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