Textiles Business Hit By GST Protests

Protests and strikes over the Goods and Services Tax (GST) by small manufacturers and traders have adversely affected the industry.

The Indian textiles business has come to a virtual standstill in many parts of the country, following protests and strikes by small manufacturers and traders over various aspects of the recently-introduced Goods and Services Tax (GST) that are showing no signs of abating.

From Surat to Erode and from Amritsar to Ichalakaranji, the protests have been widespread and brought manufacturing in these towns almost to a halt.

The latest organisations to throw their lot with the ongoing agitation were three major Ahmedabad textile markets—the Maskati Cloth Market Association, New Cloth Market and Panchkuva Cloth Market—who on Monday joined Surat merchants in demanding a rollback of the 5 per cent GST on fabric. They have decided to shut down their shops and establishments for an indefinite period.

“The 5 per cent GST on cloth is not acceptable to anyone who is in the textile business. To raise our voice against this tax, all textile markets in the city will go on indefinite strike from tomorrow, as traders will refrain from any kind of transaction,” a joint statement released by the three associations on Sunday said.

The protests over various aspects of the GST started in the textile hub of Surat when the Textile GST Sangharsh Samiti there called for an indefinite bandh on July 2 in the city’s buzzing textiles market, one of the largest in the country. Surat produces 60 per cent of the country’s synthetic cloth, and the city has more than 7,20,000 looms operated by over 1,50,000 entrepreneurs.

Textile shops in Surat have remained closed since June 15, except for a day on June 24, which has affected business. There are more than 70,000 textile traders in the man-made textiles hub, who are demanding that GST be levied only on yarn, and not on fabric. Their contention is that since the duty on yarn has been increased from 12.5 per cent to 18 per cent, there is no need for GST on fabric.

They have been arguing that all segments of the textiles industry were tax-free for the past 60 years, and there was no duty on yarn. Under the GST structure, there would be problems in implementing the credit system, and these can be avoided by one-time tax collection on yarn. They are also asking more time for implementation of the GST.

The grouse in Maharashtra’s Ichalakaranji, where over 100 textile merchants have been on a five-day strike since July 7, is the same. Textile mills in the area are expected to temporarily stop production as their cloth would not be procured by the striking traders, resulting in a fall in prices. More than 40 per cent of the loom owners here have already stopped buying yarn.

The Ichalkaranji Powerloom and Merchants Association is demanding that they should be allowed to file tax returns once in three months, instead of three returns every month. They are also seeking a guarantee that they would not be harassed by the tax authorities.

In Erode, Tamil Nadu, wholesalers observed a three-day strike over the weekend. Retailers there have shut shop since July 7 opposing the GST at various stages of production. Erode city has more than 10,000 retail shops and over 300 wholesale textile shops. Each day of strike has entailed a loss of Rs 30 crore for these traders.

According to them, the GST is being levied at 5–18 per cent at all stages of textile production by considering the dyeing, bleaching, colouring and stitching involved in turning yarn into fabric as separate segments. As a result, the taxes would work out to 23 per cent on an average. This would result in a sharp increase in both material and production costs, and would adversely affect all small and medium players in the textiles industry.

Weavers too have been on strike for over a week. “The GST will add nothing less than 25 per cent taxes on our produce against the existing zero percentage,” they asserted. Erode produces handloom and powerloom products worth more than Rs 900 crore every month.

Elsewhere in the state, powerlooms, and dyeing, packing and processing units across the textile towns of Karur, Namakkal, Tiruppur, Palladam, Somanur and Coimbatore have been protesting the imposition of GST on various stages of textile manufacturing.

Textile traders in Telangana too have sought exemption from the GST’s purview. Around 80 per cent of the traders are from the unorganised sector and earn modest living from the trade, and the levy of GST would affect them as sales will decrease. Under the GST, 5 per cent tax is being levied on readymade garments priced under Rs 1,000 and 12 per cent on those priced over Rs 1,000. This would result in around 10 per cent increase in the final price paid by the consumer, according to Telangana State Federation of Textiles’ Association (TSFTA).

“The textile trade is a credit-oriented business. Especially in the wholesale trade, the payment is received only six months after the sale of goods. Under the new GST, the trader is expected to pay tax immediately after the sale. This will result in tremendous pressure on the trader in the form of liquidity,” TSFTA president Prakash Ammanabolu said in Hyderabad.

In Amritsar, wholesale textile traders are on an indefinite strike demanding the rollback of 5 per cent GST on unstitched clothes, including all kinds of fabric, blankets and shawls. The Federation of Textile Traders of Amritsar (FTTA) has said that local member of Parliament Gurjeet Singh Aujla has extended support to their cause and assured them that he would raise their demand in the monsoon session of Parliament, which begins on Wednesday.

Meanwhile, Union ministers Mansukh Mandaviya and Parshottam Rupala—both Rajya Sabha members from Gujarat—have met textile traders in Surat. They urged traders to engage in talks with the Union government to seek an early resolution to their issues rather than staging protests.

“The intention behind rolling out GST was to give a boost to trade and business, not to harass people. I agree that traders are agitating because they are facing some problems due to this new tax structure. But, the issue can be resolved with dialogue with the government,” Rupala told reporters.

In a related development, the Indian Texpreneurs Federation (ITF) has again urged the government to reduce the GST on man-made fibres (MMF) yarn from 18 per cent to 12 per cent. The current GST rate on MMF yarn will lead to increase in fabric costs, inability of weavers to compete, and subsequently de-growth. It will also not allow a weaver to take input tax credit (ITC). Reducing the GST on MMF yarn to 12 per cent will result in a 100 per cent efficient MMF value chain that would be capable of competing against other fibres. Weavers will also be able to claim ITC on yarn if the GST is brought down.

The federation has also urged the government to reconsider GST on job work after fabric on apparel of 18 per cent as it truncates the ITC chain, considering that the GST will make weavers unable to utilise full ITC. It will also increase input cost as there’s no big ITC for job workers. By reducing the job work on apparel to 5 per cent, weavers can achieve real cascading benefits by availing full ITC on garments and receive working capital benefits for job working units, according to ITF. (SG)

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