Finance Minister Nirmala Sitharaman will chair the 46th meeting of the Goods and Service Tax Council meeting in New Delhi on Friday, December 31. The agenda of the meeting will be to discuss the inverted duty structure of certain sectors and deliberate on the reports of the two Groups of Ministers that were set up during the last Council meeting in September.

As reported earlier, after rectifying the inverted duty structures in footwear and textiles, the all-powerful GST Council may take up the issue for some other sectors, including a few pharmaceutical products. The problem of inverted duty structure arises when the finished product is at a lower tax bracket compared to the input raw materials.

However, this usually leads to the rise in rates of the finished products, and the rate increase in textiles and footwear has led to criticism from the central government’s political opposition. So, it is likely that these matters could also be discussed.

West Bengal Finance Minister Amit Mitra and Telangana Industries Minister K T Rama Rao recently urged the Centre to roll back the proposed GST rate hikes in textile and footwear. “Modi Govt will commit another blunder on Jan 1st. By raising GST on textiles (from) 5 percent to 12 percent, 15 million jobs will be lost and 1 lakh units will close,” Mitra had tweeted.

At the 45th GST Council Meeting in Lucknow on September 17, the Council had decided to rectify inverted duty structure for footwear and textiles. Subsequently the rate for footwear and textiles for any value was raised to 12 per cent, effective from January 1, 2022. Earlier the GST Rate was five per cent for sale value up to Rs 1,000 per piece in the case of apparels and per pair in the case of footwear.

While experts hailed the move, a section of the clothing industry decried it saying that only a small group of the sector had inverted duty structure. Many trader organisations have also been demanding a rollback of the rate hikes.

At the Lucknow meeting, the Council had set up two GoMs. One group was tasked with suggestions on rationalizing rates and correction of inverted duty structure and is led by Karnataka Chief Minister Basavaraj Bommai. The other group has been tasked with recommending ways to review IT systems, potential sources of evasion, and data analyses in order to expand the tax base and and maximise returns. This GoM is headed by Maharashtra Deputy Chief Minister Ajit Pawar.

Both these reports will be taken up during the in-person meeting on Friday.