Apparel, footwear to get expensive from January 1, 2022 as govt hikes GST from 5% to 12%

The government has increased the GST (goods and services tax) on finished goods such as garments, footwear and textiles from 5% to 12%, effective from January 1, 2022.

The Central Board of Indirect Taxes and Customs (CBIC) notified the hike on November 18. Meanwhile, the GST rates for certain synthetic fibres and yarn have been decreased from 18% to 12%, as per the notification, thus bringing in uniformity of rates across the entire textiles sector as well as eliminating aberrations due to the inverted duty structure, which is a situation where the tax rate on inputs used is higher than the tax on the finished product.

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GST rate on fabrics has been hiked to 12% from 5% from January 2022 and GST on the apparel of any value has also been increased to 12%, compared to 5% earlier with cost of up to Rs 1,000 per piece.

Textiles, comprising woven fabrics, synthetic yarn, pile fabrics, blankets, tents, accessories such as tablecloths or serviettes, rugs and tapestries, saw their rates increased from 5% to 12%, whereas, the rates of footwear of any value have been hiked from 5% (up to Rs 1,000/pair) to 12%.

In its September meeting, the GST Council had pledged to rectify the inverted duty structure in textile and footwear.

It added that the same will come into effect on January 1, 2022, but left the effective rates unresolved at the time.

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The Clothing Manufacturers Association of India (CMAI) said it was deeply disappointed with the government's decision to increase GST on apparel from January 1, 2022.

The industry body added that the cost hike will have a major impact as the industry is facing inflationary pressure with raw material prices, especially yarn, packing material, and freight, on the rise.