The increase in GST on garments and footwear from the current 5 per cent to 12 per cent is likely to raise the prices of these products from January 2022.

As per a Live Mint report, the GST Council had on 17 September announced its decision to correct the duty inversion on textiles and footwear value chain from January 01.Higher duty on raw materials as compared to finished products leads to an inverted tax structure, making it difficult for manufacturers to claim input tax credit (ITC), and the burden is finally passed on to the consumer.

Under the ITC system, a GST-registered business is entitled to claim levies already paid on inputs to manufacture a product, or supply a service, or both, before making a final sale to prevent cascading of taxes and to lower the tax burden.

The council is considering a 12 per cent GST rate for a bulk of products under the two segments—textiles and footwear. This will effectively correct duty inversions and allow manufacturers to claim the full ITC.