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New Delhi: Industry body Retailers’ Association of India (RAI) has urged the finance minister to reconsider the GST Council’s recent decision to increase taxes on several textile and apparel items from 5% to 12% effective January 2022.
A 7% hike has been proposed to address the issue of inverted duty structure in the textile industry faced by a small segment of the total textile value chain. However, such a steep increase in the GST rate will adversely impact 85% of the industry while trying to ease the problem faced by less than 15% of the industry, RAI said in its note.
The industry body said the pandemic has already dealt a body blow to the apparel industry as prolonged lockdowns and weak consumer demand led to a decline in sales of clothing.
Even as demand is picking up, higher prices could spook shoppers in an already inflationary environment.
RAI said it “strongly urges" the Central and State Governments and GST Council to “reconsider" its decision.
RAI also suggested that the government impose a flat 5% GST rate as a reasonable solution. “This will not only resolve the inverted duty structure anomaly but also give a fillip to the industry," it added.
Kumar Rajagopalan, CEO, Retailers' Association of India (RAI), said, the GST hike is “not in anybody’s interest".
“On the business side, it will add to the financial burden of an already-stressed sector, slow down its pace of recovery and affect working capital requirements especially in the case of MSME businesses which account for 90% of the industry. On the consumer side, it will lead to a rise in the prices of garments, thereby hurting consumption. On the government side, in the long run, it may lead to many unorganised businesses going out of the GST net," he added.
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