New Delhi: The government has increased goods and services tax (GST) on finished products such as apparel, textiles, and footwear. The increase in GST range from 5% to 12%, effective January 2022.
The Central Board of Indirect Taxes and Customs (CBIC) announced the hike on November 18. As per the notification, the GST rates for specific synthetic fibers and yarn have decreased from 18% to 12%.
Thus bringing in the regularity of rates across the whole textiles sector. This decision also eliminates differences due to the inverted duty construction. Inverted duty construction is a situation where the tax rate on inputs used is higher than the tax on the complete product.
GST charge on fabrics has been increased to 12% from 5% from January 2022. GST on the apparel has been hiked to 12%, compared to 5% earlier.
Textiles, covering woven fabrics, pile fabrics, blankets, tents, accessories such as tablecloths saw their rates rise from 5% to 12%. In contrast, the footwear prices of any value have been increased from 5% (up to Rs 1,000/pair) to 12%.
The GST Council had promised to improve the inverted duty structure in textile and footwear. It figured that the same would come into force on January 1, 2022.
The Clothing Manufacturers Association of India (CMAI) stated it was very disappointed with the government’s decision to increase GST on apparel from January 1, 2022.