GST raised from 5% to 12% from January 1, 2022, apparel and footwear will become more expensive.

With effect from January 1, 2022, the government has raised the GST (items and services tax) on completed goods such as clothing, footwear, and textiles from 5% to 12%.

The hike was announced on November 18 by the Central Board of Indirect Taxes and Customs (CBIC). Meanwhile, according to the notification, the GST rates for certain synthetic fibres and yarn have been reduced from 18 percent to 12 percent, bringing rate uniformity across the entire textiles sector and eliminating aberrations caused by the inverted duty structure, which occurs when the tax rate on inputs is higher than the tax rate on the finished product.

From January 2022, the GST rate on fabrics has been raised to 12 percent from 5 percent, and the GST rate on garments of any value has also been raised to 12 percent from 5 percent, with a cost of up to Rs 1,000 per piece.

Textiles, which include woven fabrics, synthetic yarn, pile fabrics, blankets, tents, accessories such as tablecloths or serviettes, rugs, and tapestries, have had their rates raised from 5% to 12%, while footwear of any value has had its rates raised from 5% (up to Rs 1,000 per pair) to 12%.

The GST Council promised to correct the inverted duty structure in textiles and footwear at its September meeting.

It went on to say that the same would take effect on January 1, 2022, but that the effective rates would be determined later.

The Clothing Manufacturers Association of India (CMAI) expressed dissatisfaction with the government's proposal to raise GST on clothes beginning January 1, 2022.

The industry group also stated that the cost increase will have a significant impact because the industry is experiencing inflationary pressure due to rising raw material prices, particularly yarn, packing material, and freight.