Govt put GST tax hike on textiles on hold

New Delhi:  Heeding to demands made by several states, the GST Council on Friday put on hold a decision to hike the tax rate on textiles to 12 per cent from 5 per cent, Union Finance Minister Nirmala Sitharaman said.

The panel, the highest decision-making body for indirect taxes, met under emergency provisions after states made a request for deferring the January 1 hike in GST tax rates on textiles.

Sitharaman said a similar demand for footwear was not agreed to.

A group of state finance ministers that is looking at GST rate rationalisation, has been asked to look at tax rate on textile.

The group has been asked to present the report by February next year, she said.

Currently, the tax rate on manmade fibre (MMF) is 18 per cent, MMF yarn 12 per cent, while fabrics are taxed at 5 per cent.

The Council in its previous meeting on September 17 had decided to correct the inverted duty structure in footwear and textile sectors.

With effect from January 1, 2022, all footwear, irrespective of prices, will attract GST at 12 per cent. It was also decided that a 12 per cent uniform GST rate would apply on textile products, except cotton, including readymade garments.

States like Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu have said they are not in favour of a hike in Goods and Services Tax (GST) rate on textiles to 12 per cent, from 5 per cent, with effect from January 1, 2022.