OP­PO­SI­TION AR­GUES AGAINST GST ON TEX­TILE AS “MIND­LESS TAX”

Perfect Sourcing - - Gst Update -

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

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