Government sources say new GST rates, scrapping inverted duty structure on footwear will lower prices

By

Isabelle Crossley

Published
Jan 4, 2022

Following criticism from numerous industry bodies, the government stands firm in its belief that higher Goods and Service Tax rates on footwear will reverse the inverted duty structure and lead to cheaper consumer prices. 

The new GST rates on footwear will help to facilitate trade and promote ease of doing business as well as result in cheaper footwear prices for Indian consumers, anonymous government sources told TNN. The inverted duty structure was caused by different GST rates for different prices of footwear with 5% GST levied on footwear priced below Rs 1,000 ($13.41) and 12% levied of footwear priced above Rs 1,000. The fact that many raw materials used to make footwear attract GST of 18% resulted in the inversion of duty. 
 
“The inversion in tax structure forced the manufacturers and suppliers to file refunds of accumulated input tax credit,” government sources told TNN. “This increased compliance burden and costs.” 

The government had previously planned to raise GST on numerous categories of clothing and textiles to 12% on January 1 but chose to defer the decision, apart from for footwear, in response to strikes and protests by numerous industry bodies. However, the rate increase will be implemented for these categories after the upcoming Congress elections, according to the sources. 
 
“The Council after detailed discussions on the representations received from the textile sector and the state government of Gujarat has decided to revisit the entire issue of GST rates in the textile sector and has referred it to the Group of Ministers for detailed examination,” said the sources.