Traders say new tax regime hurting their textile business
IN POLL FOCUS Thousands of traders in the bustling markets of Surat are disgruntled as the Goods and Services Tax has reduced their profit margins
SURAT: An unusual hush has fallen over the bustling textile markets of Surat. Previously, travellers would find it impossible to negotiate the maze of streets crowded with mini trucks and labourers with bundles heaped on their heads. Now, the textile hub in the heart of Gujarat’s richest city is lackluster even as markets slowly open after a Diwali break.
“We used to produce four crore metres of synthetic cloth in Surat every day. It has come down to 2.5 crore metres,” says Sanjay Jagnani who heads the local textile traders association.
Jagnani is among thousands of disgruntled textile traders in the economic capital of the western state who say problems in the uniform tax system, the Goods and Services Tax, hamstrung their business and hurt their profit margins.
This resentment is the focus of a high-decibel campaign for the assembly elections as the Bharatiya Janata Party (BJP) tries to placate its traditional vote bank and the Congress tries to cash in on the anger and initial signs of anti-incumbency.
Surat is home to around 65,000 traders, mostly Patidars, who have supported the BJP for generations but resorted to violent agitations two years ago to demand quotas in jobs and education.
The annual turnover of the textile industry is around ~400 crore and it employs more than a million people. Traders say they were not badly affected by the government’s shock recall of high-value banknotes last year because they mostly deal in credit. It was the problems in GST that hit them hard.
Traders say the tax rate of 5% is not the problem but that the process bogs them down. They claim small traders will be the worst hit. There’s an alternative school of thought, though: that before GST, at least some small traders were not paying tax (or at least, all the tax they had to).
Whatever be the case, the traders say business is down.
“The business is down by 40%. We are suffering losses,” says Manoj Agarwal, president of the Federation of Surat Textile Traders Association that represents Surat’s 165 textile markets. “Our problem is that we have to spend time filing returns. The trader has to focus on his business because in textiles you have to constantly come up with something new for consumers. We also have to give credit, up to three months. That is also getting affected.”
There’s more — all to do with the process. “Even a small trader has to file three returns in a month. They can’t afford keeping an accountant. Servers are slow and filing returns online is tedious,” says Jagnani. “In our estimate, about 30% small and medium businessmen will shut shop if things don’t improve.” Even the upcoming wedding season has failed to buoy orders and sentiment, he rues.
The anger spilled on to the streets. Traders called for a 22-day strike in July, took out a massive protest march and didn’t celebrate Diwali, calling it a black festival for them.
The government has responded with slashing the rates for some goods, extending filing deadlines and simplifying processes. But many traders say they are still angry. “90% of the textile traders were with the BJP. The government is responding now because there are elections and the ruling party is rattled. If the government doesn’t accept our demands, the traders will consider other options. They are forcing us to do that,” says Agarwal.
Five of Surat district’s 12 assembly seats can be influenced by textile traders. In the 2012 elections, the BJP won all 12 seats. This time, traders warn, there could be surprises for the party.
The Congress senses an opening and has pulled out all stops to woo the businessmen. Party vice president Rahul Gandhi addressed a rally in nearby Varachcha on November 3 and highlighted the problems of Surat’s traders. On November 8, he made it a point to visit the city and interacted with textile traders all day. In every speech, he has hit the government hard on GST problems.
The BJP, though, appears confident of retaining its base after recent changes in the tax system and a meeting between finance minister Arun Jaitley and a delegation of city traders. “Textiles traders have been our strong supporters. They are unhappy over certain issues but those are being sorted out. We are confident they trust BJP than any other party,” said Nirav Shah, local BJP leader and councilor in Surat municipal corporation, who was part of team deputed by the party to hold talks with the textile traders.
Jagnani agrees with Shah but argues that the changes might have been a case of too little, too late. “Sometimes even your own people make mistakes. Then you have to give them a jolt so that they will remember it in the future,” he says.