TaxTMI 
TaxTMI 
Minutes of the 46th Meeting of the GST Council held on 31st December, 2021
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....elhi and emphasized the significance of the meeting as it had been called under the emergency clause under proviso to sub-clause (2) of clause 3 of the Procedure and Conduct of Business Regulations of the GST Council in which 48 hours of notice had been given. 3. At the outset, the Secretary placed on record the gratitude and sincere appreciation for the valuable contribution made to the Council by Shri. Nitinbhai Patel, former Member from the State of Gujarat. On behalf of the Chairperson and all the Members of Council, he welcomed Shri. Kanubhai Desai, the new Member from the State of Gujarat, who attended the meeting of the Council for the first time. He also introduced and welcomed Shri Vivek Johri, the newly appointed Chairman, CBIC. 4. He informed that a letter had been received from the Minister of Gujarat requesting that the proposed GST rate revision of textiles from 5% to 12 % w.e.f 1.1.2022 may be deferred. As this power lies with the GST Council, a meeting of the Council had to be convened. The said letter from Gujarat was received on 29.12 2021 and the notice for the emergency meeting was issued the same day for the Council meeting. He reiterated the discussions from....
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....of accumulated Input Tax Credit had affected the competitiveness of the industry and had proven to be a deterrent for investment in this sector. The Ministry of Textiles was of the view that for tax uniformity across the value chain, Man-Made Fibres (MMF) and yarns needed to be brought under a uniform tax slab to take care of inversion in the tax structure. This would benefit the spinning and power-loom sectors, which in turn, would create huge job opportunities. An inter-ministerial group consisting of Ministry of Textiles, Ministry of Commerce and NITI Aayog had also made similar observations. The inter-ministerial group had observed that with implied limitation on growing cotton, man-made fibre base needed to grow at least five times in the next five years. The inversion in tax structure of textile sector had led to a refund of about Rs 4000 crores which was anticipated to grow considerably in future. 7. The Fitment Committee had deliberated in detail on this issue and the impact of any calibration of GST rates and fabrics or garments on the end consumers. It was observed that the Council had recommended a lower rate of 5% on all fabrics, and lower segment garments on account o....
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....recommendations after due consideration. With the permission of the chair, he requested the Hon'ble Member from Gujarat to introduce the issue. 10. Hon'ble Member from Gujarat stated that Covid had impacted GST revenues, adversely affecting the State's financial situation. Also, the GST compensation amount would not be available to the States after June, 2022. The GST compensation had helped States to manage their financial situation much better despite strained finances due to Covid. During the last Council meeting at Lucknow, a few important decisions were taken keeping in view the twin issues of GST compensation and low GST collection. Two Group of Ministers (GoMs) were set up for rationalization of rates and restructuring of GST framework, suggesting procedural reforms, improving tax administration and preventing tax evasion. He requested to ensure that the recommendations of the GoM be submitted at the earliest and the decisions should be taken based on their recommendations to lay a clear roadmap for GST in forthcoming days. 11. One of the decisions in the Lucknow meeting was regarding rate rationalization and removal of inverted duty structure in textile sector....
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....rs' associations and other associations from almost every district in Tamil Nadu including Madurai had represented against the hike. He requested that the increase in tax rate be held in abeyance for greater discussion as suggested by Hon'ble Member from Gujarat. If there was an urgent need to implement changes, then a threshold value level like Rs 3000 or Rs 5000 or more be kept, above which, levy of GST at the rate of 12 % be charged and below this, a levy of GST at the rate of 5 % should be considered, as an alternative. 14. Hon'ble Member from West Bengal stated that they had opposed this decision in the 45th meeting of the Council and favoured the GST rate of five percent. On 18th of November, 2021, the Central Government had already issued a notification and the changes were scheduled to be effective from 1.1.2022. The volume of the overall textile market was about Rs 5.4 lakh crore and 80 to 85 percent of it comprises natural fibre and the rest comprises man-made fibre. Inverted tax structure existed in the man-made fibre sector with inputs being taxed at the rate of 18 percent, but it was only 15 to 20 percent of the total volume of the industry. The textile in....
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....n. The decision to increase the GST rate on textiles required detailed study based on data. The impact of increase in GST rate on employment would also have to be factored in. He fully agreed with the proposal from State of Gujarat to defer this decision to increase GST rate till a thorough study on this matter was done. 17. Hon'ble Member from Andhra Pradesh reiterated their position to defer the decision of increase in GST rate on textiles. He stated that a deeper study of the industry had to be made as various farm produce go into making textiles. Detailed study on the share of apparel vs fabric, the share of different yarns, natural or manmade, that went into the fabric and the estimate of future refunds was required. Such a study could be made by the GoM. State of Andhra Pradesh had 3 lakh people employed in the weaving industry and was more into natural yarn and its related industries. A deeper study on these aspects would enable sound decision making. 18. Hon'ble Member from Rajasthan thanked the Chairperson for calling the emergency meeting of the Council for the purpose. He stated that the deferment of the earlier decision of the Council was not a long term solut....
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....ended. 21. Hon'ble Member from Odisha stated that he had submitted earlier to the Council that there were two aspects of textiles sector, the power loom and the handloom. There should be two tax slabs and the GST rate on handloom should be less than 5%. His constituency was globally famous for manufacture of silk sarees. Odisha is famous for Sambalpuri silk saree. The handloom sector as a whole embodied the traditional wisdom and cultural wealth of India and had a role in Atmanirbhar Bharat. The handloom and craft sector was under severe stress as average household income of handloom industry was only Rs 3,042 per month. The pandemic had exacerbated the situation and weavers had lost their livelihood. The cost of cotton yarn had also increased by nearly 30% to 40% this year. Thus, handloom sector should be taxed at a lower rate. 22. Hon'ble Member from Uttar Pradesh thanked the Hon'ble Chairperson for convening the meeting to discuss the sensitive issue of textiles and also appreciated Gujarat for raising the issue. At the commencement of the GST regime, the GST rate on textile was 5%, on threads and chemicals it was 12% and ITC refund was blocked. Later in July, 2018....
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....mber from Delhi was appreciative of calling the Council meeting at a short notice on the basis of a request from a Member for discussing an issue of urgent nature. He stated that there was a need to rationalize the tax in the sector to correct the inverted duty structure and for this a detailed presentation could be made by Ministry of Textiles on cons of increasing the GST on textiles from 5% to 12 % as pros had already been discussed in the earlier Council meetings. He stated that he had always advocated lower taxes as it resulted in higher compliance. He stated that impact of increase in tax rates on textile sector in terms of job, investment and economic condition required further deliberations and study. The decision could be deferred or rolled back and study could be undertaken to analyse the complexities in the textile sector other than tax alone in scenario of the tax rate hike. 28. Hon'ble Member from Rajasthan submitted that alternatives like new tax slabs need to be explored. He suggested formation of a Committee to study the GST taxation system from long term perspective after dividing the economy in to various sectors and then identifying the basic sectors where t....
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....bmitted that Niti Aayog and Ministry of Textiles were involved in the discussions including issues of investment and employment which were briefed to the Fitment Committee. However, in future even if there was a need to call any experts on the matter to give their suggestions or to make presentations on the impact on the textile sector on aspects other than taxation, it could be done. He further stated that the long-term policy as suggested by the Hon'ble Member from Rajasthan may be considered by the Committee on tax rationalization. He further cautioned that inverted duty structure led to refunds and the problem got compounded due to fake invoices while revenue augmentation efforts were taken with the help of technology, and many other policy decisions were taken to stop tax evasion. 33. Hon'ble Member from Haryana stated that he supported the proposal and also requested to reconsider the case of rate revision in footwear also on similar lines. 34. Hon'ble Member from Himachal Pradesh was of the view that inverted duty structure needed to be rectified to attract investment. Textile sector was gravitating towards man-made fiber. He stated that the consensus in the Co....
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....ry stated that the nominated officers are expected to take clearance from the political executive before placing the views. 40. Hon'ble Member from Tamil Nadu stated that even the political executives also face the dilemma between revenue augmentation vs the interests of the industry. Further, he stated that the Convener for GoM on Casinos, Race Courses and Online Gaming was Shri. Nitinbhai Patel. then Hon'ble Member from Gujarat. Due to changes in the Gujarat cabinet, a new convener needs to be named and requested that the functioning of the GoM and all other Committees may be better integrated. 41. Hon'ble Member from Odisha stated that inverted duty structure is only in 15% part of the Sector i.e. power loom and that 85% i.e. Handloom should not suffer due to the rest of the 15% of textile sector. 42. The officer from Uttarakhand conveyed the opinion of Hon'ble Member from Uttarakhand that the inverted duty structure had led to distortion in the textile sector which needed to be corrected. However, he had suggested that keeping in view the representations received from trade and Ministry of Textiles, it would be appropriate that the decision to increase the ta....