GST Council decides to postpone tax hike on textiles
The Goods and Services Tax (GST) Council Friday decided to defer the proposed hike in GST rate on textiles, said Union Finance Minister Nirmala Sitharaman. The matter would be forwarded to the tax rate rationalization committee, which will present its report by February, she said. To note, the GST rate on textiles was supposed to be increased from 5% to 12% from January 1.
Why does this story matter?
The decision was taken at the 46th GST Council meeting on Friday. The move will bring some relief to citizens as the new, increased GST rate would have hiked the prices of textile products. The GST on textiles was to be hiked due to corrections in the inverted duty structure. Notably, cotton products were exempted from the hike.
Next GST Council meet in February-end or early March
"The GST Council meeting has decided to retain the status quo on GST rate on textile to 5% and not raise it to 12%," Sitharaman said. The Finance Minister added the GST Council could meet again in February-end or early March once the tax rate rationalization committee's report on the issue of GST rate on textiles is submitted.
Several states flagged higher GST rate on textiles
While announcing the GST Council's decision, Sitharaman also said that several states have raised concerns over the increase in the GST rate on textiles and sought the proposed hike be put on hold. She further clarified that the deferment of the correction to the inverted duties is only applicable in the case of textiles.
Government received flak over increase in GST on textiles
Opposition parties had earlier objected to the government's move to hike tax on textile products. West Bengal's Finance Minister Amit Mitra also claimed 15 million jobs will be lost due to the tax hike. The government estimation of earning an additional Rs. 7,000 crore by raising tax is mythical, he said, adding that the tax hike will cause several units to shut down.
Sitharaman chaired 46th GST Council meeting
The 46th GST Council meeting was chaired by Finance Minister Nirmala Sitharaman in Delhi on Friday. The finance ministers of states and union territories as well as senior officials are attending the meeting. The meeting is significant as it took place ahead of the Union Budget for 2022-23, scheduled to be presented in the Parliament on February 1, 2022.
Sitharaman held pre-budget consultations yesterday
Meanwhile, Sitharaman also chaired the pre-budget consultations on Thursday with the finance ministers of states and union territories (with legislature) for Union Budget 2022-23 in Delhi. The participants in the meeting reportedly also provided their suggestions to Sitharaman for inclusion in the Budget Speech. Sitharaman reportedly thanked participants for their suggestions and assured them to examine each of the proposals.
States expressed concerns over tax hike in pre-budget meet, too
During the Sitharaman-led pre-budget consultations, too, many states reportedly expressed that they were not in favor of increasing the GST rate on textiles to 12%. They included Gujarat, Delhi, West Bengal, Rajasthan, and Tamil Nadu, among others. To recall, the tax rate hike on textile products was recommended in the GST Council's 45th meeting held in September.