Now pay 12 per cent GST on garments, textile and footwear from new year

Aurangabad, Dec 29:

The ready-made garment market is currently witnessing a boom as traders have announced huge discounts and clearance sale. This is due the significant increase in GST rates that will be levied on clothes from January 1, 2022. Garments and footwear will become more expensive as 12 per cent GST will be levied instead of 5 per cent affecting the consumers and slowing down the business.

There are more than 2000 textile traders in the district. At present, goods worth around thousand crore are kept in showrooms and warehouses. Traders have announced bumper discounts to sell as many goods as they can before the deadline. But traders also have other options. According to tax advisor Ameya Joshi, traders will get input tax credit of 5 per cent on old goods and 12 per cent tax will be levied further. The burden will fall on customers. But there is a provision in Section 14 of the GST act to avoid penalty. As per the clause, if a trader sells clothes to a customer or to someone else, his purchase bill must be made before December 31.

What can wholesalers do:

According to tax experts, the wholesalers can return the goods to the concerned company before December 31. They can re-purchase the goods on January 1 with a new bill according to the new tax slabs. The factory gets input credit on goods, hence they will not have to pay excess tax or face penalty. The traders will get bills as per the new slabs.

Consumers to face burden

If consumers buy clothes worth Rs 10,000 till December 31, they will pay GST of Rs 500. But they will have to pay Rs 1200 on the same amount as 12 per cent GST will be levied on clothes.