GST hike on textiles deferred, but footwear set to cost more

Box: To pinch common man

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Footwear costing less than Rs1,000 a pair will now attract 12% GST, up from 5%

Earlier, 12% GST was applicable only to footwear priced more than Rs1,000

As per a report, about 80% of consumers buy footwear costing less than Rs1,000

The move will have an adverse impact on the common man

Tribune News Service

New Delhi, December 31

The GST Council recommended a stay on the Centre’s decision to increase the tax rate on cheaper textiles from 5 per cent to 12 per cent from January 1, said Union Finance Minister Nirmala Sitharaman at a press conference here on Friday.

The proposal effectively puts on hold Commerce Minister Piyush Goyal’s announcement last month of a uniform tax across the entire textiles sector from January 1 to reduce the compliance burden. Currently, the tax rate on manmade fibre (MMF) is 18 per cent, MMF yarn 12 per cent and fabrics 5 per cent.

“The textile industry felt that there could be a temptation not to come into the formalised system. The immediate pressure could mean that some may go into the informal way of doing business,” said Sitharaman.

A group of state finance ministers, looking at the GST rate rationalisation, will now examine this issue. It has been asked to submit its report to the council by February.

Sitharaman said a similar demand for footwear was not accepted. From January 1, all footwear, irrespective of prices, will be taxed at a uniform rate of 12 per cent.

Vivek Jalan, partner, Tax Connect Advisory, said, “At a time when the economy is again under threat of the third Covid wave, the increase in GST rate on textiles would have been detrimental to almost one crore wholesalers and retailers. It could have led to mass unemployment.”