Ministry of Textiles sides with industry against proposed GST hike

By

Isabelle Crossley

Published
Dec 17, 2021

The Ministry of Textiles has decided to approach the Goods and Services Tax secretariat to ask for a return to the previous GST rate of 5% for clothing and textiles instead of the proposed hike to 12%.

The ministry heard representations from numerous industry bodies and agreed with them that hiking the GST rate on certain categories of clothing and textiles to 12% could cause economic hardship for businesses and push up prices, which would in-turn cause problems for consumers. The ministry will, therefore, ask the GST Council to refrain from raising the rate in January 2022 as planned, CNBC-TV18 reported.

“The industry is of the view that textile fabric manufacturers or fabric weavers will see a significant rise in their working capital requirements due to the disparity, as raw material will be taxed at 5% and the finished product will be taxed at 12%,” said a source in the Ministry of Textiles’ report, ET Bureau reported. “So, they are seeking a restoration of the old rate of percent.”

The Ministry of Textiles, “feels that the industry needs relief,” officials told CNBC-TV18. “Any decision which adds to their troubles needs to be flagged. So, our communication to the GST secretariat is very clear- maintain status quo on rates and make any change only after a detailed discussion with the ministry and the industry stakeholders.”
 
Earlier in the week, Union Minister for Finance Nirmala Sitharaman assured textile industry players that she would address the rates for the sector at the next GST Council meeting. Trade bodies including the Retailers Association of India and the Federation of Hosiery Manufacturers Association of India among others have requested the government scrap the new rates.