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FEARS LOSS IN BUSI­NESS POST GST

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• Surat Tex­tile IN­DUS­TRY FEARS LOSS IN BUSI­NESS POST GST

Ever since the Gov­ern­ment of In­dia in­tro­duced the GST regime on July 1, 2017 with the aim of cre­at­ing a one-tax, one-mar­ket na­tion, Surat’s tex­tile traders have been up in arms–they say GST has struck the death knell for their in­for­mal busi­ness chan­nels that work largely on cash and af­ford mi­nus­cule profit mar­gins.

The in­dus­try to­gether churns out around 40 mil­lion me­tres of fab­ric each day and is bur­dened to the rafters with billing queries re­lated to the im­ple­men­ta­tion of GST, both up and down their sup­ply chain.

Traders fear that GST, with its em­pha­sis on for­mal­is­ing busi­ness by mak­ing them reg­is­ter for a GST num­ber– thereby in­tro­duc­ing trans­parency and widen­ing the tax net– will lead to busi­ness go­ing to larger, or­gan­ised traders. They also be­lieve it will in­crease pa­per­work and make it dif­fi­cult to main­tain ac­count books without hir­ing ac­coun­tants, an ad­di­tional bur­den for cash-strapped busi­nesses that work on thin profit mar­gins.

With Ganesh Chaturthi round the cor­ner, the fes­tive sea­son would con­tinue well into Oc­to­ber and Novem­ber with Durga Puja, Di­wali and Ch­hath. How­ever, the in­dus­try sees noth­ing great this year amidst all chaos due to GST.

Surat’s traders had gone on strike on July 1, 2017, but had called it off af­ter 18 days on Fi­nance Min­is­ter Arun Jait­ley’s as­sur­ance that the GST Coun­cil would con­sider their de­mands at its meet­ing on Au­gust 5, 2017. Jait­ley had re­fused to re­move the tax al­to­gether say­ing that such re­moval would break the in­put tax credit chain.

The coun­cil re­duced the tax rate for ‘job work’–third party ser­vices such as stitch­ing and em­broi­dery–to 5% from the ear­lier 18%, but traders were un­happy that it had not ad­dressed many other con­cerns. There are ru­mours they might re­sume their strike.

While there have been protests in tex­tile hubs across the coun­try–in Pun­jab, Ra­jasthan, West Ben­gal and Ma­ha­rash­tra–surat has be­come the epi­cen­tre of the fight against GST.

Lo­cated 270 km south of Ahmed­abad, the com­mer­cial cap­i­tal of Gu­jarat, and a sim­i­lar dis­tance north of Mum­bai, In­dia’s fi­nan­cial cap­i­tal, Surat has a rich his­tory of trade and a

long-run­ning tra­di­tion of man­u­fac­tur­ing tex­tiles.

The city saw a tran­si­tion from cot­ton to syn­thetic fab­rics in the late 90s. To­day, Surat pro­duces 40% of all man­made fab­ric made in In­dia, as a sup­port­ive pol­icy struc­ture has played a sig­nif­i­cant role in the suc­cess of Surat’s tex­tiles in­dus­try.

Con­sider the 700-hectare Sachin GIDC. This cen­tre houses 2,250 in­dus­trial units, in­clud­ing 1,750 tex­tile units, 70 dye­ing and print­ing mills and 40 dyes and chem­i­cals units. It is es­ti­mated that around 350,000 peo­ple are em­ployed therein.

Surat’s tex­tiles in­dus­try–its pow­er­loom units, dye­ing and print­ing mills, and traders–em­ploy 10 lakh (1 mil­lion) work­ers di­rectly or in­di­rectly, in for­mal as well as in­for­mal jobs. Many of th­ese work­ers had to leave the city dur­ing the 18-day strike when there was no work.

The value-ad­di­tion stage of a sa­ree (em­broi­dery, etc.) op­er­ates largely in an in­for­mal setup. A trader pur­chases dyed fab­ric, and sends it to hun­dreds of em­broi­dery units scat­tered across the city. There is much back and forth in­volv­ing mid­dle­men who col­lect sa­rees and dis­trib­ute them among hun­dreds of women work­ers who work part-time from their homes.

Surat has nine such GIDC es­tates, where the gov­ern­ment pro­vides en­abling in­fra­struc­ture and fis­cal sup­port, which Su­rati traders have been ag­gres­sive in safe­guard­ing.

When a cen­tral value-added tax (Cen­vat) was im­posed on the in­dus­try in April 2003, tex­tile traders again struck work un­til, months later, a new gov­ern­ment was formed that rolled back Cen­vat im­po­si­tion on pow­er­looms.

As with most sec­tors of the econ­omy, Surat’s tex­tiles busi­nesses are con­fused about how GST will im­pact the sup­ply chain, whether it will in­crease costs and prices and whether it will com­pli­cate or sim­plify pro­cesses. Most of all, there is con­cern about main­tain­ing ac­counts. The com­mon re­frain in Surat is that most tex­tile traders are un­e­d­u­cated.

In April 2014, right be­fore the gen­eral elec­tion, anti-dump­ing duty was im­posed on PTA im­ports from China, Euro­pean Union, South Korea and Thai­land. In July 2016, the an­tidump­ing duty or­der was amended and duty was im­posed on China, Iran, Tai­wan, In­done­sia and Malaysia.

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