To correct duty structure, FinMin notifies 12% GST on textiles, footwear from January 1 - The Indian Express

To correct duty structure, FinMin notifies 12% GST on textiles, footwear from January 1 – The Indian Express

With an aim to correct the inverted duty structure for textiles and footwear under the Goods and Services Tax (GST) regime, the Finance Ministry has notified a uniform 12 per cent rate for manmade fibre (MMF), yarn, fabrics and apparels, along with a 12 per cent uniform rate for footwear. The GST Council had taken the decision to correct the inverted duty structure for these two categories in its meeting in September, with the changes to be effective from January 1 next year.
In a notification on Thursday, the Ministry notified a 12 per cent rate for manmade fibre, fabrics, yarn and apparel. At present, tax rate on manmade fibre, yarn and fabrics is 18 per cent, 12 per cent and 5 per cent, respectively. Apparel and clothing up to Rs 1,000 per piece currently attracts 5 per cent GST. Synthetic and artificial yarn have been changed to 12 per cent but natural yarn like cotton, silk, wool yarn are still in 5 per cent slab.
For footwear also, the price differential has been done away with. The Ministry notified a uniform 12 per cent rate. At present, footwear up to Rs 1,000 a pair attracts 5 per cent GST.
An inverted duty structure arises when the taxes on output or final product is lower than the taxes on inputs, creating an inverse accumulation of input tax credit which in most cases has to be refunded. Inverted duty structure has implied a stream of revenue outflow for the government prompting the government to relook the duty structure. For footwear, the government estimates peg the refunds to be around Rs 2,000 crore in a year.

The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state finance ministers, had in its previous meeting on September 17 decided to correct the inverted duty anomalies in the textile sector from January 1, 2022.
The decision on inverted duty structure was deferred in June last year as the Council did not agree on the timing of the rate rationalisation to be done during the pandemic. Taking note of the revenue trend dipping below the revenue neutral rate levels, the GST Council will now be looking at a series of measures including rate rationalisations to correct the inverted duty structure and the overhauling of the rate structure going ahead.
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To correct duty structure, FinMin notifies 12% GST on textiles, footwear from January 1 - The Indian Express

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