Background:
The GST Council’s 45th meeting held on September 17, 2021 has recommended changes in GST rates to mitigate inverted duty structure on textile and footwear.
Accordingly, the CBIC vide Notification No. 14/2021- Central Tax (Rate) dated November 18, 2021 amended Notification No. 1/2017- Central Tax (Rate) dated June 28, 2017 (“Goods Rate Notification”) w.e.f. January 1, 2022 to change GST rate from 5% and 18% to 12% to overcome refund of Inverted Duty Structure w.e.f. January 1, 2022.
However, in 46th GST Council meeting held on December 31, 2021, the GST Council had recommended to defer the decision to change GST rates on textiles from 5% and 18% to 12%.
Accordingly, following notification has issued:
Notification:
The CBIC issued Notification No. 21/2021-Central Tax (Rate) dated December 31, 2021 in suppression of Notification No. 14/2021- Central Tax (Rate) dated November 18, 2021 so as to remove above- mentioned amendment (i.e., change GST rate from 5% and 18% to 12% w.e.f. January 1, 2022). Thus, now previous GST rates as appliable will apply on textiles on or after January 1, 2022.
This notification shall come into force on the January 01, 2022.
Our comments:
The GST Council has taken a laudable decision to defer hike in GST rate on textiles from 5% to 12% w.e.f January 1, 2022 as it will give much needed impetus and support to textile sector wherein large number of small & medium scale taxpayers were worried with the recent hike in GST rates and this decision of GST Council is in right direction and advisable for the Government to build confidence and consensus among traders before hiking GST rates in future. Further, the Government should brought down the GST rates of raw materials to 5% from 12%/18% if at all, the Government wanted to done away with inverted duty structure for textile sector.
However, there is no deferment on GST rate from 5% to 12% on footwear w.e.f. January 1, 2022, which is also one of unorganized sector with small/ medium scale traders and generates lots employment opportunities. This sector also needed support and sustainability but now, this hike in GST rates will make footwear expensive for the common man. And, to ensure sustainability of footwear sector as it creates lots of employment opportunities and also fighting with pricing and costing, etc., the Government should have deferred hike in GST rate from 5% to 12% for this sector as well.
Similar notifications have been passed under Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).
CGST (Rate) Notification: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-21-2021-cgst-rate.pdf
IGST (Rate) Notification: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-21-2021-igst-rate-english.pdf
UTGST (Rate) Notification: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-21-2021-utgst-rate.pdf