GST Council working to fix the inverted duty structure in order to reduce the tax burden on the garment business

The Apparel Export Promotion Council (AEPC) said on Saturday that the GST Council’s resolution to fix the inverted duty structure on textiles from January 1, 2022 will reduce the tax burden on fabrics and apparel made of artificial fibres.

On September 17, the GST Council resolved to fix the inverted duty structure on footwear and textiles beginning January 1, 2022.

The judgement will be a great breather for the business, according to AEPC Chairman A Sakthivel.

He stated that the inverted duty structure has been a problem for the apparel industry, and that the council had made recommendations to the government to correct this anomaly, which has resulted in input tax credit accumulation, which has been preventing businesses from accessing critical working capital.

The GST rate on inputs into the MMF fabric category (fibre and yarn) is 18% and 12%, respectively, whilst the GST rate on MMF fabric is 5% and that on finished items apparel is 5% and 12%, according to him.

It establishes a tax system in which the rate on inputs is greater than the rate on outputs, raising the effective tax rate on MMF fabrics and garments and violating the notion of fibre neutrality, according to Sakthivel.

He also stated that the GST Council’s decision to prolong the GST exemption on goods transported by vessel and air from India to countries outside India till September 30, 2022 will help to mitigate the current high freight costs.