GST Council decides to defer rate hike on textiles from 5% to 12%

Early reports suggested that the council would likely put the hike on hold.

Indian industry and other various States have opposed the increase in the tax to 12% from 5% effective January 1, citing higher compliance cost for the unorganised sector and MSMEs, and also claiming that it will make the ‘poor man’s clothing expensive’.

States like Gujarat, West Bengal, Delhi, Rajasthan and Tamil Nadu said that they are not in favour of a hike in GST in a pre-budget meeting chaired by union finance minister Nirmala Sitharaman.

The move to raise GST on textiles is not ‘people-friendly’ and should be withdrawn, said Delhi deputy chief minister Manish Sisodia. “Delhi is not in favour of this,” he added.

“It is a one-point agenda (for Friday’s council meeting). It is an agenda that many states have raised. In the agenda item it says that it was raised by Gujarat but I know that many states raised it. It (the move to raise the GST rate) should be stalled,” said Tamil Nadu finance minister P Thiaga Rajan before the council meeting.

Confederation of All India Traders (CAIT) said that the higher tax would add to the financial burden on end users, affect small businesses, and encourage tax evasion.

The 46th meeting of the Goods and Services Tax (GST) Council was held in the national capital under the chairmanship of FM Sitharaman.

Union ministers of state in the Ministry of Finance, Pankaj Chaudhary and Bhagwat Kishanrao Karad, besides the senior officials in the Ministry of Finance, also attended the meeting.

The meeting holds significance as it is taking place ahead of the Union Budget for 2022-23, which is scheduled to be presented in Parliament on February 1, 2022.