“It was a brief meeting in which there was only one agenda. It was triggered by a letter which was written to me by the finance minister of Gujarat, requesting for reconsideration of the September 2021 decision taken in the council,” Sitharaman told a press conference after the end of the emergency meeting.
“What are the decisions of the emergency meeting today – that we retain the status quo and not go to 12% from 5%, meaning don’t do the correction now in case of textiles,” said Sitharaman. The 45th meeting of the council in Lucknow in September had decided to correct the inverted duty structure in the textile sector and the rate increase was scheduled to take place in January.
The inverted duty structure refers to a situation where a finished product comes under a lower tax block compared to raw materials used as inputs. The issue of rates in textiles has now been referred to a panel of ministers headed by Karnataka chief minister Basavaraj Bommai, which is reviewing overall rate rationalisation. Sitharaman said the panel will submit its report by February and it will be circulated to all ministers and the council will discuss it either in February-end or sometime in March.
The FM said she had received several representations from industry associations on the issue. Several states had demanded roll-back of the proposed rate increase on natural fibres, fabrics and garments. Former West Bengal FM Amit Mitra, who is now the principal chief adviser to the state chief minister, had recently said the proposed increase would lead to massive job losses and closure of 1 lakh small units.
Several state finance ministers had also raised the issue of rolling back the duty hike at their pre-Budget meeting with Sitharaman on Thursday. The GST Council has been working on correcting the inverted duty structure on at least 10 items and, in its Lucknow meeting, had decided to correct it in case of textiles and footwear.