FEARS LOSS IN BUSINESS POST GST
• 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.