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 and referred to a panel of state ministers to recommend rate by February, 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 tax rate hike on textiles, from the current 5 per cent, to be effective from January 1, 2022. 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. In the Council meet in September, it was also decided that a 12 per cent uniform GST rate would apply on textile products, except cotton, including readymade garments.
Briefing reporters after the Council meeting called under ‘emergency provisions, Sitharaman said the Council had in September decided to correct the duty inversion in textiles with effect from January 2022. Sitharaman said states also raised the issue of long-term ways by which the Council could look at correcting duty inversion and also have a plan for revenue generation.
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.
Amit Mitra, advisor to West Bengal Chief Minister, had earlier urged the Centre to roll back the proposed tax rate hike on textiles, saying this would lead to closure of around 1 lakh textile units and 15 lakh job losses.