The government has increased goods and services tax (GST) applicable on finished products such as apparel, textiles and footwear from 5 percent to 12 percent, effective January 2022.
This was notified by the Central Board of Indirect Taxes and Customs (CBIC) on November 18.
GST rate on fabrics has been increased to 12 percent from 5 percent from January 2022 and GST on apparel of any value has been increased to 12 percent, compared to earlier when pieces priced up to Rs 1,000 were subject to 5 percent GST.
Rates for textiles (including woven fabrics, synthetic yarn, pile fabrics, blankets, tents, accessories such as tablecloths or serviettes, rugs and tapestries has also been increased from 5 percent to 12 percent and that of footwear of any value has been hiked from 5 percent (up to Rs 1,000/pair) to 12 percent.
The Clothing Manufacturers Association of India (CMAI) on November 19 said it was “deeply disappointment" at the government’s decision to hike GST rates on apparel, reports said.
“CMAI, along with associations and trade bodies from all over India have been vigorously representing to the government and GST Council not to implement this change, and it is indeed extremely disappointing that the Council has chosen not to heed their plea," Rajesh Masand, president, CMAI said in the statement, Mint reported.
The statement added that impact of this cost increase will be pronounced as the industry is facing inflationary headwinds, with prices of raw materials, especially yarn, packing material, and freight on an upswing. "The market was expected to see a 15-20 percent price increase in apparel cost in the coming season even without the GST rate increase. Over 80 percent of India’s apparel market comprises garments priced below Rs 1,000, the industry body added.
“CMAI believes this measure is completely misplaced, as it is reportedly introduced primarily to address the Inverted Duty Structure existing in a section of the Industry – and this sector is not more than 15 percent of the total industry. To resolve a problem which exists in 15 percent of the Industry therefore, this move will adversely impact 85 percent of the total industry," said Masand.
The hike was reportedly based on the recommendations of the GST Council.