According to government sources, the new GST rates and the elimination of the inverted duty structure on footwear would cut prices

04 January 2021, Mumbai:

Despite objections from a number of business groups, the government continues to believe that increasing the Goods and Service Tax rate on footwear will reverse the inverted duty structure and result in lower consumer pricing.

According to unidentified government sources, the new GST rates on footwear would serve to expedite commerce and encourage ease of doing business, as well as result in lower footwear prices for Indian customers.

Different GST rates for different prices of footwear generated the inverted duty structure, with 5% GST on footwear priced below Rs 1,000 ($13.41) and 12% GST on footwear priced beyond Rs 1,000. The inversion of duty was caused by the fact that numerous raw materials used to create footwear are subject to 18 percent GST.

According to government officials, "the inversion in tax structure obliged the producers and suppliers to file refunds of accrued input tax credit." "The compliance load and expenditures have grown as a result of this."

The government had intended to raise the GST on a number of types of clothes and textiles to 12% on January 1, but deferred the decision, with the exception of footwear, due to strikes and protests by a number of industry groups. According to reports, the rate hike would be enforced for these groups after the 2018 Congress elections.

"The Council has decided to revisit the entire issue of GST rates in the textile sector and has referred it to the Group of Ministers for detailed examination," according to the sources.

"After detailed discussions on the representations received from the textile sector and the state government of Gujarat, the Council has decided to revisit the entire issue of GST rates in the textile sector and has referred it to the Group of Ministers for detailed examination."

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