Finance Minister Nirmala Sitharaman decided to postpone the increase in VAT or GST rates on textile products this year in order to maintain business continuity in India. Nirmala said the PPN Council has actually approved the increase in the textile product tax rate from 5 percent to 12 percent this year. However, the government finally decided to postpone the policy. "We maintain the status quo and decided not to increase [VAT] from 5% to 12%," he said, Thursday (20/01/2022). The finance minister explained that the delay in increasing the VAT rate on textile products was due to the sector contributing a lot to the Indian economy.

Textile production in India has an economic value of $140 billion or 2% of GDP.

If the VAT rate on textile products is increased, it is estimated that 15 million Indians will lose their jobs and 100,000 units of textile production will be closed. Thus, the increase in textile VAT rates will harm textile business actors in India.

The government's decision to delay the increase in textile GST rates was also welcomed by governments in states such as Gujarat, West Bengal, Telangana, and Andhra Pradesh.

Currently, the VAT rate on textile products reaches 5%. Meanwhile, the VAT rate on textile products in the form of man-made fibers and yarns is 18% and 12%, respectively.

Previously, adviser to the governor of West Bengal, Amit Mitra, asked Indian Prime Minister Narendra Modi not to increase VAT or GST on textile products because he feared it could add to the burden on society.