Summary of Points Finalized in the Meeting

1. Context and Purpose of Emergency Meeting
The meeting was convened under the emergency clause of the GST Council procedure due to the urgency arising from the request of the State of Gujarat. The letter requested deferring the proposed GST rate hike on textiles from 5% to 12% effective from 1 January 2022. The decision was previously taken in the 45th GST Council Meeting at Lucknow.
46th GST Council Minutes, page 1

2. Issue of Inverted Duty Structure in Textile Sector
The Council discussed the long-standing issue of inverted duty structure in the textile industry, where inputs (like yarn, dyes, and chemicals) attracted higher GST rates (12%–18%) than the output fabric (5%). This led to accumulation of unutilized ITC, affecting standalone spinning and weaving units. The Ministry of Textiles and NITI Aayog had earlier supported uniform tax rates to remove distortions and promote investment.
46th GST Council Minutes, pages 2–3

3. Representations from States and Stakeholders
Several states, including Gujarat, Tamil Nadu, West Bengal, Andhra Pradesh, Rajasthan, Kerala, and others, voiced concern that the tax increase would severely impact the MSME textile sector, employment, and affordability, especially given the post-COVID recovery phase. Many requested to defer or review the decision and conduct a detailed study involving trade associations and state governments.
46th GST Council Minutes, pages 4–8

4. Views Supporting Deferment
There was wide agreement across members that the rate increase on textiles and footwear should be deferred due to:
Negative impact on employment and small units.
Inflationary pressure on essential goods.
COVID-19 disruptions and uncertainty due to Omicron variant.
Need for a long-term GST rate rationalization plan.
46th GST Council Minutes, page 7

5. Suggestions for Further Study
Members from Tamil Nadu, Rajasthan, Delhi, and Odisha recommended commissioning an analytical study on the sector’s tax structure, employment data, and investment trends. The Group of Ministers (GoM) on Rate Rationalization was asked to integrate these aspects and consider distinctions between handloom and power loom products before recommending any future rate revisions.
46th GST Council Minutes, pages 8–10

6. Consensus Decision: Deferral of GST Rate Hike on Textiles
After extensive deliberations, the Council unanimously decided to defer the implementation of GST rate increase on textiles from 5% to 12%, which was earlier scheduled to take effect on 1 January 2022.
The matter was referred to the GoM on Rate Rationalization (headed by the Hon’ble Chief Minister of Karnataka) for further examination.
46th GST Council Minutes, pages 12–13

7. Mandate to the Group of Ministers (GoM)
The GoM was directed to:
Review the textile sector’s rate structure comprehensively.
Examine inverted duty issues and possible solutions.
Submit its report by February 2022 or first week of March 2022.
46th GST Council Minutes, page 13

Final Outcome:
Decision to defer GST rate hike on textiles from 5% to 12%.
No change in existing GST rates until further review by the GoM.
GoM to submit a comprehensive report on rate rationalization and textile sector implications.
46th GST Council Minutes, page 13