NEW DELHI: Extension of GST compensation and roll back of recent GST rates hike for textile sector top the agenda of the GST (Goods and Service Tax) Council which is going to meet for the 46th time on Friday. The issue was already flagged in Finance Minister’s pre-budget meeting with the state finance ministers on Thursday.
Sources said, the main agenda of the meeting will be the rate hike in textiles to correct inverted duty structure. Apart from that, the Group of Ministers constituted during last meeting will also submit its report on rate rationalisation, which includes removal of items from exemption list, checking the possibility of merging slabs and correction in inverted duty structure.
Tamil Nadu Finance Minister P Thiagarajan and Rajasthan Technical Education Minister Subhash Garg confirmed that the rate hike in textiles will be the main issue.
“The states received the agenda just yesterday. So a very short notice, and textile seems to be the main point of discussion,” Thiagarajan said.
In September, the Council decided to rectify inverted duty structure for footwear and textiles, which was raised to 12%, effective from Jan 1, 2022 from 5%. This led to protests by traders and manufacturers. Rajasthan, Telangana, West Bengal and Delhi have opposed the move.
“The AAP and Delhi government under leadership of Arvind Kejriwal have been in favour of keeping the tax rates low. I will demand keeping tax on textile low in the GST Council meeting tomorrow,” tweeted Manish Sisodia, minister incharge of Delhi government’s finance department.
Former West Bengal Finance Minister Amit Mitra also claimed that this will result in job loss of 15 million and will lead to closure of at least 1 lakh units.
Report on rate rationalisation
The Group of Ministers constituted during last meeting will submit its report on rate rationalisation, which includes removal of items from exemption list, examining possibility of merging slabs and inverted duty structure.
FM holds pre-budget consultation with state finance ministers
Even as the states acknowledged the support extended by the finance ministry during Covid-19, they have asked government to extend the GST shortfall compensation beyond five years and to increase the share of Centre in its sponsored projects.
Finance minister Nirmala Sitharaman on Thursday held pre-budget consultation with the state finance ministers.
"The state, mostly opposition ruled, asked the centre to extend the the GST shortfall compensation for another 5 years, citing Covid 19. The matter was already settled as the proposal was ruled out in the last council meeting," a senior official present in the meeting confirmed, adding that the ministry is in no mood to reconsider it.
Apart from that, states also demanded that the share of Centre in the Centre-sponsored schemes must be hiked given the situation of revenue collection. States are still to match the pre-Covid levels of revenue. States were also concerned about the sudden rise in Covid-19 cases.
While they claimed to be better prepared, there was demand to take into account the current situation and to enhance spending on healthcare accordingly. While Finance minister heard all the suggestions, she also asked the state to increase capital expenditure and asked them to complete the target.