Textile manufacturers, merchants and traders have opposed the goods and services tax (GST) hike on textile from 5 percent to 12 percent, which comes into effect from January 1, 2022.

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As things stand right now, GST is at 5 percent for cotton fabric and garments. This accounts for nearly 85 percent of the industry. For manmade fibers and manmade yarn, it is 12 percent and 18 percent respectively. Street was hoping that the inverted duty structure would rationalize by bringing all of them to 5 percent as against raising the 85 percent market to the 12 percent bracket.

Also Read: Explained: Crucial GST changes coming in from January 1

Also Read: GST rate revision for textile sector runs into headwind

This hike would impact the end-user prices in multiple ways. More importantly, 5 percent GST would motivate a lot of the small, unorganized traders to move into the tax bracket because it was a nominal charge but now that it has increased to 12 percent, it would again motivate a lot of people to go back to the unorganized or untaxed sector, which could worry the government.

Also Read: GST Council meet on Dec 31, to discuss rate rationalisation

Watch the accompanying video of CNBC-TV18’s Mangalam Maloo for more details.

First Published:Dec 30, 2021 1:26 PM IST