The Goods and Service Tax (GST) Council, which will meet in New Delhi on Friday, may discuss deferment of hike on GST rates on textiles and footwear from 5% to 12% and give more time to the group of ministers on rationalisation of tax rates and slabs to submit its report.
Textile and footwear industries have been up in arms against the GST Council’s decision in September to correct the inverted duty structure by increasing the GST rates on textiles and footwear with effect from January 1.
At present, tax rate on manmade fibre, yarn and fabrics is 18%, 12% and 5%, respectively. Apparel and clothing up to Rs 1,000 per piece currently attracts 5% GST. Synthetic and artificial yarn have been changed to 12% but natural yarn like cotton, silk, wool yarn are still in 5% slab.
For footwear also, the price differential has been done away with with a uniform 12% GST rate. At present, footwear up to Rs 1,000 a pair attracts 5% GST.
The Council could also look at giving more time to e-commerce operators (ECOs) such as Zomato and Swiggy, to comply with the requirement for them to pay the 5% GST on restaurant services supplied through them from January 1, to modify their software as the invoicing responsibility has also shifted from restaurants to them.
In September 2021 it was announced that tax liability will be on ECOs for restaurant services provided through them. However procedural aspects like invoicing and other compliances were only clarified by a circular issued by the revenue department on December 17, giving them less than two weeks time to change software.
The Council will also likely extend the time given to the seven-member group of ministers led by Karnataka chief minister Basavaraj S Bommai to suggest measures to rationalise GST rates as the two month time given to it has ended on November 27.
The GoM will review the current tax slab rates and recommend changes as needed to garner more resources as well as review special rates and recommend rationalisation measures, including merger of tax rate slabs, required for a simpler rate structure in GST.
Its terms of reference also include review of the supply of goods and services exempt under GST with an objective to expand the tax base and eliminate breaking of input tax credit (ITC) chain. It would also review the instances of inverted duty structure other than where GST Council has already taken a decision to correct the inverted structure and recommend suitable rates to eliminate inverted duty structure as far as possible so as to minimize instances of a refund due to inverted duty structure.