Indian govt defers GST hike on textile products after several states object

The Goods and Service Tax (GST) Council has deferred raising the proposed tax rate on textiles from 5 per cent to 12 per cent after several states reportedly raised objections.

During the 46th GST council meeting convened in New Delhi on Friday under the chairmanship of Finance Minister Nirmala Sitharaman, it was decided to review the matter in the next meeting in February 2022.

“The GST Council meeting has decided to retain the status quo on GST rate on textile to 5% 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,” Sitharaman told reporters after the meeting.

Many states said they are not in favour of a hike in GST rate on textiles to 12 per cent, from five per cent currently, with effect from January 1, 2022.

The matter was raised by states like Gujarat, West Bengal, Delhi, Rajasthan, and Tamil Nadu, according to reports.

Apart from that, the industry bodies had also opposed a rise in the tax rate, citing higher compliance costs especially for the unorganised sector and micro small and medium enterprises (MSMEs) besides making the poor man's clothing expensive.

Earlier in the year, the Central Board of Indirect Taxes and Customs (CBIC), on the recommendations of the GST Council, had announced that the GST rate on garments, textiles, and footwear would be raised from five per cent to 12 per cent with effect from January 1, 2022.

(With inputs from agencies)