Clothes, footwear to get expensive from January 2022, GST to increase from 5% to 12%

GST on apparel, textiles and footwear will increased from 5% to 12% with effect from  January 1 2022. However, GST rates on or certain synthetic fibres and yarn have been lowered to 12% from 18% making rates uniform across the entire textile sector. This has also led to removing distortions which led to an inverted duty structure. The inverted duty structure refers to a situation where the tax rate on inputs used is higher than a tax on the finished product. The GST Council in its September meeting had vowed to correct the inverted duty structure in textile and footwear. It said the same will come into effect on January 1, 2022, but left the effective rates undecided at the time.

From January 1, the GST rate on apparel of any value will be 12%. Earlier it was 5% on apparel with cost of upto Rs 1,000 per piece. While experts hailed the move, the clothing move expressed its unhappiness saying that inverted duty structure affects only a section of the population. "The GST rate changes will ensure that the inverted duty structure issues will come to an end on account of the 12 per cent uniform rate across the value chain," said M S Mani, senior director at Deloitte India. Industry association Clothing Manufacturing Association of India (CMAI) said it was deeply disappointed with higher GST on apparel from January 1. The tax increase comes at a time when industry is facing inflationary pressure with prices of raw materials, yarn, packing material and freight on the rise. The market had expected 12-15% price rise even without the GST, the industry body said.