More GST Rate Changes In Store To Address Inverted Duty, Exemptions

Along with removing other exclusions, the GST Council may propose another round of rate adjustments to address the remaining cases of inverted duty. The second round is being worked on by a group of ministers (GoM) led by Karnataka chief minister Basavaraj Bommai, according to The Economic Times.

The GoM is working on the next list, and a proposal may be presented before the next council meeting, which is expected to be in September, said a senior official, adding that “the inverted duty rectification exercise has not yet ended and there is more work remaining.”

“Many significant choices were made throughout the previous two to three fruitful sessions. Textiles are among the things that are still waiting, according to a source with knowledge of the situation.

Inverted duty structures are those that discourage value creation by having a tax rate on inputs that is higher than the tax rate on outputs. According to the source, tax officials would consult with business to get input if necessary.

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According to specialists, inverted duty structures are also common in autos, particularly electric vehicles, certain electronic devices, urea, and other fertiliser inputs.

According to Saurabh Agarwal, tax partner at EY, “The adjustment in inverted duty structure in industries like textiles, electric cars, etc. will assist the industry in liquidating their accumulated credits, smoothen working capital concerns, and decrease compliances.”

The GST Council agreed to change the inverted duty structure for textiles and footwear in September of last year. Duty on completed clothing and shoes of any value was fixed at 12% as of January 1.

Previously, the GST rate was 5% for completed garment sales valued up to $1,000 per item, such as shirts, and per pair, such as shoes.

Manufacturers and traders opposed the rise, claiming it would have a negative effect on India’s textile sector and result in job losses. Many governments protested the hike, which was ultimately reversed. These states included Rajasthan, Telangana, West Bengal, and Delhi.

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I Varsha Chhirolya having an experience in digital marketing of 5 years, I am an account manager in CREATIVE Ad Agency.

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