Centre hikes GST from 5% to 12%, clothes & footwear to get more expensive from January 1

The government has raised the goods and services tax (GST) on finished goods such as garments, textiles, and footwear from 5 per cent to 12 per cent. The newly changed tax slab will come into effect starting January 1, 2022. The hike decision was notified by the Central Board of Indirect Taxes and Customs (CBIC) notified on November 18.

The price of finished goods such as garments, textiles, and footwear will now see a hike owing to the new tax slab change set by the government. The GST for the products will now be increased by 7 per cent. Textile items with a cost of up to Rs 1,000 per piece including woven fabrics, synthetic yarn, pile fabrics, blankets, tents, rugs and tapestries, and footwear of any value have their GST rates raised from 5 per cent to 12 per cent. Meanwhile, the GST rates for certain synthetic fibres and yarn have been decreased from 18 per cent to 12 per cent, in an attempt to bring uniformity of rates across the entire textiles sector.

Centre increases goods and services tax on apparels and footwear

With the two changes, the government plans to eliminate aberrations due to the inverted duty structure where the tax rate on inputs used is higher than the final tax placed on the finished product. Earlier in September, the GST Council had pledged to rectify the duty structure in the textile and footwear sectors causing a difference in the problem in the taxation system. The new GST valuation will come into effect on January 1, 2022.

Meanwhile, the Clothing Manufacturers Association of India (CMAI) have raised concern over the decision. CMAI said that it is deeply disappointed with the government's decision to increase GST. The manufacturers association body claimed that the hike will impact the industry in a major way. They added that the textile industry was already under inflationary pressure with raw material prices rising. Prices of items like yarn, packing material, and freight charges have increased marginally over the last few years.

Centre to bear loss due to fuel price cut

Earlier last week, the Centre clarified that the loss due to the reduction in fuel prices will entirely be borne by the Centre alone. Addressing a press conference, Finance Secretary TV Somanathan said that the reduction of Rs 5 (in petrol) & Rs 10 (in diesel) has been in the non-sharable portion of excise duty i.e. not borne by states. As per govt sources, the reduction in excise duty on diesel being double that of petrol are meant as a boost to the farmers during the upcoming Rabi season. States have also been urged to reduce VAT on petrol & diesel to give relief to consumers.

(Image: PTI)