Industry body PHDCCI has said the government should bring down the GST rates on textile inputs, such as fabric and yarn, to address the inverted duty structure, instead of raising rates on garments, as it could affect sustainability of the sector.

“The amendment has been made to change GST rate from 5 per cent and 18 per cent to 12 per cent to overcome inverted duty structure from January 1, 2022. However, it is not the solution as, by increasing the GST rate on textile products from 5 per cent, the government has created more hurdles for the industry as this sector is majorly un-organised,” pointed out Bimal Jain, Chair, Indirect tax committee, PHDCCI.

Instead, the government should have brought down the rates of raw material to 5 per cent and ensured sustainability of the sector that creates employment opportunities, he added.
If the intention of the government was to remove the inverted duty structure, then reversal of ITC should not have been made compulsory for the textile industry in July 2018, Jain said.