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GST reform: Prices of footwear and clothes will increase from January

GST reform

New Delhi: The prices of clothes and shoes are likely to go up from January next year with the revision of the tax structure. The GST on these products will go up from 5 percent to 12 percent.

The GST Council meeting on September 17 decided to revise the tariff on textiles and footwear from January. However, details of the tax rate have not been released. There are high prices for raw materials needed to make clothes and shoes. The committee recommended that the tax structure be consolidated because of inadequacies in the tax deduction (input tax credit) arrangement for the purchase of goods for trade.

Manufacturers are currently passing on the burden of tax regulation to consumers. The idea of raising the excise duty on textiles and footwear to 12 percent is being considered as it will make it easier for manufacturers to claim the full tax on raw materials if the GST is consolidated.

It is estimated that the increase in retail prices will be relatively small if manufacturers pass on the benefits of tax consolidation to consumers. A uniform tax of 12 percent will be applicable on goods. At the same time, the tax may be revised at two rates for footwear. 12 percent for those up to Rs 1000 and 18 percent for those above 10,000. At present, GST is 5 percent on garments up to Rs 1,000. And 12 percent for those above that. Similarly, footwear below Rs 1,000 is taxed at 5 percent and above at 18 percent.

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