23 December 2021, Mumbai:
V-Mart will pass on the full seven percentage point GST rate hike on apparel. If this is not allowed, the fashion retailer will cut discounts to mitigate the cost impact.
GST rates on textiles and apparel have been raised to 12 per cent from five per cent to rectify inverted duty structures. Inverted duty structures are where there is a higher tax on the input than the tax on finished goods or the output. This basically results in excess accumulation of credit which may not go unutilized.
Raymond, too plans to pass on the full hike. The sweet spot for most of mills is around 8 per cent to 8.5 per cent. But since the GST rate has been taken to 12 per cent, the textile industry has said it does not have so much leeway that it can absorb four per cent additional cost.
With GST hike demand is expected to be severely hit in the low income segment. Almost 90 per cent retail is still in the unorganised sector.
When GST was brought in at a low rate, a clear signal was given to small unorganised retailers to join the mainstream. But now if the tax rate becomes high, it is feared this would give them an incentive to revert to the cash economy and evade taxes.
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