The GST Council’s recent decision to increase taxes on several textile and apparel items from 5 per cent to 12 per cent effective January 2022 is becoming a nationwide issue as many trade bodies across India are raising their disappointment against the same.
Industry body Retailers’ Association of India (RAI) has urged the Finance Minister to reconsider this decision.
Kumar Rajagopalan, CEO, RAI said that the GST hike is “not in anybody’s interest.” He further added that on the business side, it will add to the financial burden of an already-stressed sector, slow down its pace of recovery and affect working capital requirements especially in the case of MSME businesses which account for 90 per cent of the industry. On the consumer side, it will lead to a rise in the prices of garments, thereby hurting consumption. On the Government side, in the long run, it may lead to many unorganised businesses going out of the GST net.”
In Ludhiana, Rajat Sood, a senior member of the Chamber of Industrial and Commercial Undertakings (CICU) and representative of the textile industry, said the textile trade was badly hit by Covid-19 and was still struggling for its survival. “Under such circumstances, this increase in tax rates on textile will be a setback to textile sector.”
But on the other side, Finance Minister Nirmala Sitharaman said this decision is aimed at correcting the inverted duty structure that was leading to the accumulation of input tax credit by companies. She did not subscribe to the industry’s fears that this would lead to higher prices of finished products. “Every time adjustments in rates do not lead to the price increase for customers. Higher rate on inputs was leading to higher refunds to taxpayers and needed correction. Correction of the inverted duty structure was decided at the GST Council.
Raja Shanmugam, President, Tirupur Exporters’ Association said that the rate hike is a serious concern for domestic players. They have to raise charges for the end-customers from 5 per cent to 12 per cent. But for exporters, this is a good step. It will relieve any accumulation that might happen due to input tax credit.”
Earlier, Ministry of Textiles said the move will help the man-made fibre (MMF) segment grow and emerge a big job provider in the country.