The Goods and Services Tax (GST) Council may lower the rate on carpets at its next meeting amid reports of massive closure of units in Uttar Pradesh and Jammu & Kashmir.
Carpets were earlier exempted from local taxes, and currently face 12% GST, which states say has made the sector uncompetitive and led to widespread closure at a time when cheaper machinemade carpets from China are finding their way into India.
“It is almost on the verge of closure. Uttar Pradesh has seen large-scale closures and our industry is also facing pressure. No one will want to see a heritage item like this die. I am almost certain that the council will be generous and also offer more flexibility in handicrafts,” J&K finance minister Haseeb Drabu told , after the GST Council meeting in Guwahati.
Sources said the levy on carpets will be reduced to 5%, which is seen to be moderate tax and is expected to help revive the industry.
While the proposal has been pending before the Centre for several weeks, a decision is only expected now. On Friday, the GST Council agreed to reduce the rates on over 200 items with 178 from the top bracket.
Handicrafts has been a key concern for several states and most have sought an exemption, something that the Centre as well as most members of the GST Council are not comfortable with. They fear potential misuse of the benefit on offer.