New Delhi: West Bengal’s former finance minister AmitMitra has urged Union Finance Minister NirmalaSitharaman to call a GST Council meeting urgently and roll back the proposed hike on textile products from 5 per cent to 12 per cent under Goods and Service Tax (GST).
Mitra, currently the Principal Chief Advisor to West Bengal Chief Minister, said the new rate structure — effective from January 1 — would lead to closure of around 1 lakh textile units and losses of 15 lakh jobs in the country.In its previous meeting on September 17, the GST Council had decided that the inverted duty anomalies in the textile sector would be corrected from January 1, 2022.
The Central Board of Indirect Taxes and Customs (CBIC) on November 18 had notified a 12 per cent GST rate for man-made fibre, man made fibre yarn and fabrics.
At present, tax rate on man-made 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.
The Centre had aimed to correct inverted duty structure with this move.
An inverted duty structure arises when the taxes on output or final product are lower than the taxes on inputs, creating an inverse accumulation of input tax credit (ITC) 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.“My question is if a cost-benefit analysis has been done.
Cost is massive closure of units, particularly small and medium units, (which will give rise to) unemployment. The units (which migrated to) the formal economy by registering for GST (may be forced to) become informal again,” Mitra said in a virtual press meet.
He said these small and medium textile units that operate with very thin profit margins won’t have working capital to move from 5 per cent to 12 per cent GST rate. “If GST is increased, price increases will be 6-7 per cent, demand would fall by at least 3 per cent. Also, there will be inflationary pressure. (All this for) expected Rs 7,000 crore additional GST revenue, which, in my view, is questionable.”
