Key takeaways from the 46th GST Council Meet

As per the Finance Minister, Nirmala Sitharaman, who chaired the 46th meeting of the GST Council, the meeting was called under the emergency meeting provisions. This meeting had been called specifically at the request of the Finance Minister of Gujarat to discuss the deferment of the increase in GST on textiles from 5% to 12%.

In the 45th meeting of the GST Council, it had been decided to address the anomaly of inverted duty structure in certain products. To rectify this anomaly, the Council had suggested raising the GST rate on textiles from the existing 5% to 12%. This hike in GST rate was to be effective from 01-January 2022.

However, after the decision was taken, there had been severe protests. The textiles traders across the North had objected to this hike in GST on textiles. Other states like West Bengal, Tamil Nadu and Gujarat with a robust textile industry had called for deferring this provision. In fact, Dr. Amit Mitra of West Bengal had warned that 15 million jobs could be lost.

In deference to the strident demands, the Finance Minister confirmed in the press briefing that the decision to raise the GST rates on textiles from 5% to 12% was being deferred till the next meeting in February. In the meanwhile, as a special case, the issue of duty inversion in the textiles sector will be referred to a rate rationalization committee.

It may be recollected that the objections to the GST Hike from 01-Jan pertained to the textiles industry and the footwear industry. However, as per the statement by the Finance Minister, the decision to defer the increase in GST was only taken in the case of textiles. That logically means that footwear will attract the higher rate of 12% GST from 01-January.

The GST offsetting compensation had been offered by the center for a period of 5 years. That compensation scheme would come to an end in June 2022. The Finance Minister of Kerala had demanded another 5 year extension of the GST compensation scheme, but that was not taken up for discussion in the meeting on 31-December.

Regarding tweaking of GST rates or the merging of the 12% GST and 18% GST slabs, there has been no debate and hence no decision at the 46ths GST Council meet. Status quo has been maintained on these issues. The next meeting of the GST Council is scheduled on February after the presentation of the Union Budget for 2022-23.