The all-powerful GST Council, chaired by Finance Minister Nirmala Sitharaman, is expected to defer the implementation of higher tax on textiles when it meets on Friday (December 31) as several states and industry are against the hike in the tax to 12 per cent from 5 per cent effective January 1, mentioning higher compliance cost, particularly for the unorganised sector and micro, small & medium enterprises (MSMEs), and saying that it will make the common man’s clothing costly.
In a pre-budget meeting chaired by FM Sitharaman, states such as Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu said that they are not in favour of an increase in GST, according to a report in ET.
Delhi Deputy Chief Minister Manish Sisodia said the idea to hike GST on textiles is not people-friendly and this should be withdrawn. If a common man buys clothes of Rs 1,000, he has to pay GST of Rs 120. “I will demand keeping tax on textile low in the GST Council meeting tomorrow,” tweeted Sisodia on Thursday who is also minister in charge of Delhi government’s Finance department.
The financial daily quoted Tamil Nadu Finance Minister P Thiaga Rajan as saying, “It is a one-point agenda (for Friday’s council meeting). 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 (the move to raise the GST rate) should be stalled.”
“We will push for a complete rollback . . . We have received several representations from the industry . . . This sector is a large employer and has large MSMEs who will be impacted,” said the Tamil Nadu FM. Several others are ready to put on the hold the increase in GST.
Telangana and West Bengal have urged Prime Minister Narendra Modi to look into the matter, mentioning possible job losses and closure of units. “The textiles sector needs to be encouraged,” Rajasthan Cabinet Minister Subhash Garg said.
Earlier, Principal Chief Advisor to West Bengal Chief Minister Mamata Banerjee and the State’s former Finance Minister Amit Mitra had said the Centre’s decision to raise GST in the textile sector to 12 per cent would result in 15 million job losses and 100,000 units would be forced to close.
The publication mentioned the domestic textile and apparel production is about $140 billion including $40 billion of textiles and apparel export. The textile and apparel industry contributed 2 per cent to the overall GDP of India in 2019 and 11 per cent to total manufacturing in gross value addition.
A decision to hike the GST on textile products to 12 per cent was taken at the 45th meeting of the GST Council held on September 17. The new rates will come into effect from January 1, 2022.
In its year-end statement on Monday (December 27), the Textiles Ministry had said the higher and uniform GST has addressed the inverted tax structure in the manmade fibre (MMF) textile value chain and will help the MMF segment grow and emerge as a big job provider in the country.
The Confederation of All India Traders (CAIT) has urged FM Sitharaman to defer the implementation of the GST rate hike on textiles and footwear, saying the higher tax will not only enhance the financial burden on end-users but also adversely impact small businesses and encourage tax evasion.
