Retailers Association of India urges government to scrap proposed GST hike on clothing and textiles

By

Isabelle Crossley

Published
Nov 25, 2021

The Retailers Association of India made an appeal to Union Finance Minister Nirmala Sitharaman to reconsider the government’s proposal to significantly increase goods and services tax rates on apparel and textiles. 

Following the government’s announcement of its proposal to increase GST rates on numerous apparel and textile categories from 5% to 12%, the RAI warned the government that such a hike would drastically harm the industry. The RAI said in a public statement that a GST hike will force retailers to increase clothing prices which will harm consumption. The organisation also warned that the move could cause unorganised, small businesses to avoid GST altogether. 
 
The RAI also implored the GST Council and state governments to reconsider the proposal, arguing that many apparel retail businesses are already struggling due to the current economic situation. 

“Such a steep increase in the GST rate will adversely impact 85% of the industry while trying to ease the problem faced by not more than 15% of the industry,” said the RAI in a statement, the Press Trust of India reported. 
 
As an alternative, the RAI suggested that the government make the whole textile and apparel value chain subject to a flat 5% GST rate. The RAI argued that this will both resolve the inverted duty structure anomaly and aid the industry.
 
“The increase in GST rates on textiles and apparel is not in anybody's interest due to its impact,” said RAI CEO Kumar Rajagopalan.

“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 [micro, small, and medium enterprise] businesses which account for 90% of the industry.”