46th GST Council Meeting Highlights

According to a press release issued on December 31, 2021, by the Ministry of Finance, Union Finance & Corporate Affairs Minister Nirmala Sitharaman convened the 46th GST council meeting in New Delhi, under the emergency provision. The GST council decided that the meeting must be held at least once per quarter of the fiscal year. The last GST council meeting was held on September 17th, 2021.

46th GST Council Meeting Highlights

1. GST Hike on Textile Deferred: The Goods and Services Tax (GST) Council, a federal indirect tax authority, decided on Friday to put on hold a decision to hike the GST rate on numerous textile and clothing goods in response to several complaints from the textile industry. According to Finance Minister, Ms. Nirmala Sitharaman, the GST Council preferred to retain the status quo rather than address a tax anomaly in the textile business, which would have forced a tax rate increase from 5% to 12%, beginning 1st Jan 2022. 
2. Ms. Sitharaman stated that the Council recognized addressing the inverted duty structure. As raw materials are taxed more than the finished product, resulting in enterprises request refunds for the additional taxes paid on inputs. 
3. As previously stated, the tax rate on footwear valued up to INR 1,000 will increase from 5% to 12% from 1st Jan 2022. Footwear costing more than INR 1,000 is now subject to an 18% GST. 
4. Another change that takes effect from 1st Jan 2022 is related to online food delivery services. As per this change, every e-commerce business providing food delivery services will be responsible for collecting tax on behalf of eateries, which will take effect on 1st Jan 2022. 

Points of Observation Related to 46^th GST Council Meeting 

The GST Council has made a commendable decision to defer the increase in the GST rate on textiles from 5% to 12% with effect from 1st Jan 2022, as this will provide much-needed impetus and support to the textile sector, where a large number of small and medium-scale taxpayers were concerned about the recent hike in GST rates, and this decision is in the right direction and advisable for the Government to build confidence and consensus among traders before hiking GST rates in the future. Furthermore, if the Government intended to do away with the inverted duty structure for the textile sector, it should lower the GST rates on raw materials to 5% from 12% or 18%. 

However, there is no deferment on the GST rate on footwear, which would increase from 5% to 12% from 1^st January 2022, and is another unorganized industry with many small and medium-sized enterprises. This industry, too, required assistance and long-term viability, but the recent increase in GST rates will make footwear prohibitively expensive for the average person. And, to guarantee the long-term viability of the footwear industry, which generates a large number of jobs while simultaneously grappling with price and costing issues, the government could have postponed the increase in the GST rate from 5% to 12% for this sector as well.