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It’s official now that garments are going to be costly.

The Government has issued a notification regarding the GST hikes from existing 5 per cent to 12 per cent with effect from 1 January 2022. It covers most of the textile items ranging from chapter 55 to chapter 63.

Now consumers will almost pay 7 per cent extra for their clothing, adding fuel to the inflation fire for clothing as cotton and yarn prices have gone up by 60 per cent in the last one year.

GST rate on textile products WEF from 1 January 2022

So far, GST on garments above Rs. 1,000 is already at 12 per cent and all types of textile job work are at 5 per cent.

Already opposing this expected move of the Government, the textile and apparel industry has reacted strongly on this.

Sanjay K. Jain, Chairman, ICC Textile Committee & Past CITI Chairman said, “This is going to have a very negative impact on industry and consumers. Mainly MSMEs supply low-end garments, so the reduction in consumption as that segment is more price elastic and more working capital requirements will put more nails on that struggling segment.”

It is also worth mentioning here that post GST, compliance has grown multi-folds in the unorganised segment of the industry, as at 5 per cent there was no financial gain in evading GST.

However it is feared at 12 per cent, the unorganised segment will once again go back to old days.

“The GoI follows a carrot and stick approach. The carrot is offering PLI schemes for 5 years ranging around 3 to 5 per cent spread over a period. The stick is instant increase in GST rates by 7 per cent. A master stroke to penalise both consumer and manufacturer in one shot,” says K.E. Raghunathan, Crusader for MSME and Convenor of Consortium of Indian Associations.

This increase in GST will also put more pressure on working capital requirements, especially after the interest subvention has been suspended from September.

Source : https://in.apparelresources.com/