With garments and footwear priced above ₹2,500 per piece slotted in the 18 per cent rate-cut category by the GST Council, not everyone is applauding the new tax structure.
The Retailers Association of India (RAI) and the Clothing Manufacturers Association of India (CMAI), while welcoming the two-slab GST framework and removal of inverted duty structure across the textile value chain, argued that garments priced above ₹2,500 are also consumed in large numbers by the common man and the middle class, who will now find it harder to shell out extra money to own them.
The GST Council, in its 56th meeting held on Wednesday, approved a two-slab tax structure comprising 5 and 18 per cent categories. While GST rates were slashed on almost 175 items, others, like garments and footwear were rated according to their M.S.P. Garments, including apparel and textiles which are knitted, and whose sale value does not exceed ₹2,500 per pair, have been put in the 5 per cent GST slab from a previous 12 per cent slab, but those exceeding ₹2,500 per pair will be taxed at the previous 18 per cent.
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The GST on footwear of sale value not exceeding ₹2,500 per pair has been cut to 5 per cent from 12 per cent, and for those exceeding ₹2,500 per pair has also been maintained at 18 per cent.
"All garments and footwear should ideally be taxed at 5 per cent, or at the very least, a more reasonable price threshold should be established," said RAI in a statement, adding that placing garments and footwear priced above ₹2,500 in the 18 per cent GST slab could hurt middle-class affordability and weaken organised retail and the garment sector.
Expressing similar views, CMAI said in the entire value chain from fibre to garment, garments above ₹2,500 are the only products which are not at 5 per cent.
"Garments above the price of ₹2,500 are also consumed in large numbers by the common man and middle class, especially woollen clothing, occasion wear, Indian traditional clothing, handlooms, embroidered clothes produced by artisans and traditional weavers are all priced above this limit of ₹2,500 – all of which will see a significant price increase due to this change of GST rate," it noted.
CMAI has asked the GST Council to “remove this anomaly”, saying all garments, irrespective of the price, should either be placed at 5 per cent or be fixed at a more reasonable and realistic price level.
RAI too reiterated its long-standing demand to reduce GST on commercial rentals from 18 per cent to 5 per cent for retail outlets to "support retail viability and eliminate inverted duty structures across key categories".
The two retailers' bodies, did acknowledge, however, that the "cleaner two-slab GST framework is vital step towards simpler and fairer taxation”.
With the reforms expected to lower consumer prices overall, stimulate demand and consumption, enhance the ease of doing business, especially for retailers and MSMEs, and support overall retail sector growth, the bodies welcomed the government’s move.
CMAI also welcomed the adoption of a fibre-neutral policy that equates man-made fibres and cotton fibre chains.
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