GST rose on clothing, shoes cost under Rs 1,000
Clothes, clothes and shoes used by the poorer population will become more expensive from January 1, as the center has decided to increase the goods and services tax to 12 percent on items under 1,000 rupees.
The new GST rate for clothes up to 1,000 rupees per item and shoes up to 1,000 rupees per pair has been increased by 5 percent. Synthetic and man-made yarns will also attract a higher GST of 12 percent, but cotton, silk and wool yarns have so far been spared.
The move was taken to correct the reverse tariff structure for textiles and leather goods. A reverse tariff structure arises when taxes on finished products are lower than taxes on intermediate consumption. This prevents manufacturers from using input tax credits for higher raw material taxes.
The tax rate changes were recommended by the GST Council, the top decision-making body on indirect taxes, which the government said was in favor of traders.
Also Read – Withdraw Plan To Increase GST Rate On Textile And Apparel: Telangana Minister to Center
However, traders have made mass rallies against the move, saying it will harm a large section of the people in the country.
The country’s 700-strong small traders association, Confederation of All India Traders, said on Sunday that the GST council had stopped consulting traders and was making arbitrary decisions because it had no real-life relevance to trading.
It is said that 85 percent of the country’s population buy clothes and shoes worth less than 1,000 rupees, which is currently attracting the lowest GST rate of 5 percent. “The decision is extremely irrational and will have an impact on the livelihoods of small manufacturers, craftsmen and other areas,” said CAIT.
The textile sector, the second largest income-generating sector after agriculture and severely affected by Covid-19, offers jobs to a large part of the economy, especially in small and medium-sized industries.
Experts have spoken out against the move, saying it would affect demand in an economy already affected by consumption and also increase inflationary pressures.
Former West Bengal finance minister Amit Mitra warned that the move will result in the closure of at least 1 lakh of small and medium-sized textile operations that operate on low profit margins and have no working capital to move from 5 percent to 12 percent GST.
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