OPPOSITION ARGUES AGAINST GST ON TEXTILE AS “MINDLESS TAX”
At the GST council meet in Hyderabad, the Finance Ministers of Congress ruled constituencies argued that implementation of GST had enfeebled the textile sector and had put the comparatively smaller players in great distress. The party said the losses suffered by the textile sector, in which around 12 crore people are engaged and is the second-largest job provider after agriculture, could notably affect the economic growth of the country unless concerns were addressed effectively. States such as Gujarat, Maharashtra, Punjab and Tamil Nadu are the worstaffected.
Congress Vice-president Rahul Gandhi had gone to textile hub
Surat in Gujarat and met shopkeepers, entrepreneurs and representatives of unorganised labour in the textiles, embroidery and jewellery sectors. They told Gandhi about the job losses and the GST’S impact on their livelihood and the leader promised to take up their concerns on the table of the law makers.
The Congress leadership called Punjab Finance Minister Manpreet Badal and his Karnataka counterpart Krishna Byre Gowda to Delhi to highlight the problems caused by GST before the national media. Punjab’s Finance minister said the GST structure on textile violated all three core principles articulated by the Prime Minister Make in India, employment generation and export promotion and this has created chaos and pandemonium in the sector. Congress leaders further debated the lack of preparations and measures taken by the government before implementation to make it a success; they said most states experienced shortfall in revenue collection because a large number of traders and manufacturers could not file returns on time owing to glitches and resultant extension of deadlines. They cited the example of Punjab having a shortfall of Rs 800 crore last month.
Punjab’s Finance minister said the central government had claimed a total GST collection of close to Rs 92,000 crore for the month of July. These collections camouflage nearly Rs 30,000 to Rs 40,000 crore of likely taxes that were available as transitional credits, but could not be taken because of the glitches in the GST network and the confusion created by the government by issuing misleading statements. They claimed that the total of these credit tax collections would be far less, creating serious doubts both about GDP growth and tax numbers. Gowda, Karnataka’s Finance Minister clearly mentioned how the smaller businesses were suffering .The Congress then issued a statement explaining how the textile sector had been affected.
They argued that manmade fibres are nearly 60% of Indian fibre demand. Manmade fiber and yarn, dyeing and printing units and embroidery are being taxed at 18%, while the rate on the end product, i.e. fabric, is only 5%. This is proving to be a death knell for the small and micro non-integrated textile players, while helping only the biggest fish to sustain themselves. The example given was: “If 1 kg of manmade yarn costs Rs 100, an integrated player will sell the yarn to a non-integrated player at Rs 100, which will attract 18% tax. After taking into account this tax and the value addition of Rs 20, the cost of fabric will be Rs 138. Considering the 5% duty on fabric, garment makers, while purchasing fabric, will sustain a cost of Rs 145. Against this, for an integrated player, cost will be much less at Rs 100+20=120+5%=Rs 126.”Such a situation was, therefore, a result of mindless imposition of GST.
Small manufacturers are at a further loss as they make grey fabric with value addition as little as 10-20% on yarn. Thus, they have to bear irrecoverable tax credits of nearly 12-14%, while big businesses who go for higher value addition in fabrics suffer much less.
The party concluded saying “Those with integrated plants (producing) yarn to apparel suffer no loss as they will be able to recover the entire tax credits. On top of it, while Indian fabric manufacturers will pay such high taxes, imports from China, Bangladesh, Sri Lanka and other countries at 5% will further hit India’s textile sector, making it unprofitable.”
Manmade fiber and yarn, dyeing and printing units and embroidery are being taxed at 18 per cent, while the rate on the end product, i.e. fabric, is only 5%. This is proving to be a death knell for the small and micro nonintegrated textile players, while helping only the biggest fish to sustain