46th GST Council Meeting — Textile Rollback & Cess Extension

The proposed increase from 5% to 12% on textiles and footwear (below ₹1,000) was postponed because: (1) Multiple states including Gujarat, West Bengal, Tamil Nadu, and Rajasthan — major textile manufacturing states — strongly opposed the hike; (2) Post-COVID economic recovery was still fragile, especially for MSMEs and weavers; (3) The hike would increase clothing costs for common people; (4) India's textile export competitiveness would be affected at a time when the sector was recovering. A GoM was constituted to study the issue holistically, including inverted duty structure correction.

When GST launched (July 2017), states were guaranteed 14% revenue growth for 5 years (till June 2022). A Compensation Cess was levied on luxury/sin goods (tobacco, cars, aerated drinks) to fund shortfalls. Since actual collections fell short (especially during COVID), the Centre borrowed ₹2.69 lakh Cr via back-to-back loans. The 46th Meeting discussed extending the Compensation Cess levy beyond June 2022 till March 2026 — NOT to compensate states further, but to repay the loans taken during 2020-22. States wanted compensation beyond June 2022 too, but the Centre said the constitutional provision only guarantees 5 years.

The 46th Meeting extended several COVID-19 GST reliefs originally introduced in the 43rd-45th Meetings: (1) Exemption on COVID drugs (Tocilizumab, Amphotericin B, Remdesivir) till March 2022; (2) 5% rate on vaccines retained; (3) COVID testing kits (RT-PCR, RAT) continued at 5% instead of reverting to 12%; (4) Oxygen concentrators for personal import at 12% (vs 28%); (5) PPE kits and sanitizers at reduced rates. These were significant because India was still dealing with Omicron wave concerns in December 2021.

Brick manufacturing in India is largely informal/rural. The 46th Meeting introduced an optional scheme: brick kilns can choose to pay 6% GST WITHOUT input tax credit (simplified compliance), instead of the regular 5% with ITC. Why? Most brick kilns don't have proper invoices for inputs (clay, coal, labour). Claiming ITC was impractical. The 6% flat rate removes the need for ITC documentation while slightly increasing the rate. This is similar to the Composition Scheme (Section 10) but sector-specific. Over 1.5 lakh brick kilns across India benefit.

The 46th GST Council Meeting was held on 31 December 2021 via video conferencing from New Delhi. It was the last meeting of 2021 and was convened specifically to decide on the textile rate hike which was scheduled to take effect from 1 January 2022. The virtual format was used due to Omicron COVID variant concerns. The meeting was relatively short (single day) as the primary agenda item — textile rates — was quickly deferred after strong state opposition. The next meeting (47th) was held 6 months later in June 2022.