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GST Council meet on Friday: Textile rate, duty structure may be key issues

The meeting, to be chaired by Union Finance Minister Nirmala Sitharaman, will be held a day after the pre-Budget consultations with state finance ministers on Thursday.

By: ENS Economic Bureau | New Delhi |
December 30, 2021 4:15:26 am
Finance Minister Nirmala Sitharaman (File)

A discussion on rate rationalisation and inverted duty structure for some goods is likely to feature at the 46th meeting of the Goods and Services Tax (GST) Council on Friday. Some state finance ministers are also likely to take up the issue of the proposed hike in GST rate on textiles to 12 per cent from 5 per cent effective January 1, two state government officials said.

The meeting, to be chaired by Union Finance Minister Nirmala Sitharaman, will be held a day after the pre-Budget consultations with state finance ministers on Thursday. The Group of Ministers (GoM) set up to review the current rate slab structure under GST had deferred its final meeting on November 27 to discuss various proposals for rate rationalisation and measures to shore up revenues. The GoM is now expected to directly submit its report to the GST Council, which may not reflect the concerns raised by some states over recommendations of major rate tweaks by an officer-level fitment committee.

The officer-level fitment committee is learnt to have recommended raising of tax rates from 5 per cent to 7 per cent and 18 per cent to 20 per cent, for which some state finance ministers had raised concerns over impact of such major rate changes. Some states had cited concerns about the inflationary impact of any such major rate hikes, especially in the aftermath of the pandemic.

The GST has five tax slabs: zero, 5 per cent, 12 per cent, 18 per cent and 28 per cent. A compensation cess, from 1 per cent to 290 per cent, is levied on demerit and luxury goods over and above the topmost rate of 28 per cent.

The decision on rate hike for textiles is also expected to be opposed by some states. Last week, Amit Mitra, the Principal Chief Advisor to West Bengal Chief Minister, had urged Sitharaman to roll back the proposed hike. He said the new rate structure would cause closure of around 1 lakh textile units and losses of 15 lakh jobs nationally. Telangana Industries Minister KT Rama Rao too has urged the Centre to withdraw its proposed plan to hike GST rates.

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