GST Council's decision to correct inverted duty structure to cut tax burden of leather industry: CLE

New Delhi:  The decision of the GST Council to correct inverted duty structure on leather footwear from January 1, 2022, would help reduce tax burden of the sector and boost domestic manufacturing of manmade fibre (MMF) fabrics and garments, CLE said on Sunday.

Council for Leather Exports (CLE) Chairman Sanjay Leekha said GST (goods and services tax) on leather footwear worth less than Rs 1,000 is 5 percent and over that value, the tax is 18 percent, but the GST on inputs for these footwear ranges up to 18 percent.

“We have suggested rationalisation of the tax on these footwears,” he said.

The GST Council in its meeting on September 17 agreed to correct inverted duty structure on footwear and textiles from January 1, 2022.

He said that the inverted duty structure has been an issue with the industry and that the Council had made recommendations to the government for the elimination of this anomaly that has been resulting in input tax credit accumulation blocking crucial working capital for businesses.

It creates a tax structure where the rate on inputs is higher than that on the outputs and this increases the effective rate of taxation of the sector.