NEW DELHI: The uniform 12% rate of GST on all footwear shall go a long way in facilitating trade and promoting ease of doing business. Doing away with the inverted duty structure will actually reduce costs and prices for the common man, government sources said on Monday, while rebutting criticism that the increase in rates will hurt common citizens.
They pointed out that dual rates of 5% on footwear priced below Rs 1,000 and 12% on footwear above Rs 1,000 were creating operational and interpretational difficulties for the trade and industry. The lower rate of 5% was resulting in inversion of duty as most of the raw materials used for manufacture of footwear attract GST of 18%, the sources said. “The inversion in tax structure forced the manufacturers and suppliers to file refunds of accumulated input tax credit. This increased compliance burden and costs,” the sources said.
They also termed as “factually incorrect and misleading” comments that the GST Council has deferred implementation of increase in rates on textiles by a month in view of elections. The Congress party had said the decision has not been withdrawn and the increase will be brought back after elections.
“The Council after detailed discussions on the representations received from the textile sector and the state government of Gujarat 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,” the sources said.
Reacting to the criticism that GST of 5% has been levied on food delivery, restaurants and cloud kitchen services, the source said there is no change in the tax incidence for consumers. “In fact, this decision will reduce the compliance burden and compliance costs of restaurants and cloud kitchens, savings from which they could potentially pass on to consumers, thereby reducing the price they pay for food delivery orders,” said the sources.
Food delivery services, restaurants and cloud kitchens have been attracting GST of 5% since November, 2017. The only change is that so far the liability to pay GST on these services supplied through electronic commerce operators (ECOs) was on the restaurants and cloud kitchens. With effect from January 1, 2022, this liability has been shifted from restaurants and cloud kitchens to the ECOs such as Swiggy and Zomato. ECOs were collecting GST of 5% on these services prior to January 1, 2022 also. “Now they will not only collect but will also pay the GST collected by them from the consumers directly to the government,” said sources, while pointing to the same changes for online taxi and autorickshaw bookings.
They said electronic commerce operators like Ola and Uber will be liable to pay GST on auto rickshaws booked through them. “Therefore, this will not put any GST compliance burden on the individual auto rickshaws operating through the ECOs. ECOs are organised players with sufficient IT and other infrastructure to meet the requirements associated with payment of GST.”