In a major relief to MSMEs in the apparel and textile sector, the GST Council on Friday took the decision to defer the hike in GST on textiles from 5% to 12%, announced Finance Minister Nirmala Sitharaman after the conclusion of the meeting.
Addressing a media briefing, FM Sitharaman, who chaired the GST Council meeting, said the meeting was called under "emergency provision:, and that the Council only had a brief meeting with one agenda.
"Gujarat FM requested for deferment of decision taken in the Sept Council meet on inversion of tax structure," the finance minister said. The GST rate hike on textiles from 5% to 12% was to come into effect from January 1, 2022.
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Meanwhile, no decision on deferment of the hike on footwear was taken at the meeting. The Council will take a review of the deferment in February.
FM Sitharaman further stated that the Council decided to defer the correction of inverted duties for textiles and that the same will again be referred to the 'rate rationalisation panel' which will submit its report by the end of February (2022).
The Council members also discussed merging the GST tax slabs of 12% and 18% during the meeting, but, no final decision was taken on the same.
The meeting was an extension to the pre-budget meeting of FM Sitharaman with state finance ministers on Thursday (December 30).
Currently, GST is a four-tier slab structure of 5, 12, 18 and 28 per cent. Essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. On the top of the highest slab, a cess is levied on luxury and demerit goods.
There have been demands for merging the 12 and 18 per cent slabs as also taking out certain items from the exempt category to balance the impact of slab rationalisation on revenue.
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West Bengal's former finance minister Amit Mitra had earlier 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 the closure of around one lakh textile units and 15 lakh job losses.
Telangana Industries Minister KT Rama Rao also urged the Centre to withdraw its proposed plan to increase GST rates.
Industry also opposed the rise in tax from five per cent, citing higher compliance costs especially for the unorganised sector and MSMEs besides making the poor man's clothing expensive.