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GST Council to correct inverted duty structure


At its Lucknow meeting on September 17, the GST Council announced its intentions to correct the inverted duty structure in the industry by levying 12 percent GST on all textile products except cotton.

As per a SRTEPC report, this will raise synthetic prices by nearly three times. The GST Council/ The new rates will be effective from January 1, 2022. Currently, man-made fibre-based textile value chain is witnessing 5-18 per cent GST rate at different levels. GST rate is 18 per cent on mono-ethylene glycol (MEG) and purified terephthalic acid (PTA), 12 per cent on polyester partially-oriented yarn (POY) and 5 per cent on grey fabric, finished fabric and garments.

This has led to a tax structure where the rate on inputs is higher than that on the outputs, leading to inverted duty structure. Experts have pointed out that correction of inverted duty will lead to seamless input tax credits, making the impact benign on the entire value chain. Biggest impact of the proposed change in tax structure would be on man-made fibrebased textile value chain, mainly developed in Surat and South Gujarat region, claimed Ashish Gujarati, President ,South Gujarat Chamber of Commerce & Industry (SGCCI).