Topic

It is now more than a month since GST has been implemented. What hiccups is the industry facing?

The implementation of the Goods and Services Tax (GST) has been met, at least initially, with protests against some of its aspects. Some trade and apparel bodies share the changes they are seeking with Fibre2Fashion.

 

We are not opposing GST. Our only concern is that it is a complicated and lengthy process. Measures should be taken to simplify them. It is difficult to maintain on a monthly basis. Also, the tax is levied on every stage of manufacturing cloth.

Many have imported machinery and those who have incorporated Make in India will face difficulties with GST. It is very complicated. In 2–3 months, we can see lower production of textiles. After agriculture, textiles contribute majorly to the country’s GDP. As of now, there are people who are yet to apply and get their GST numbers. So, it will take time for the business to catch up.

We are still urging the government. It is difficult to follow the GST slab on clothes. There was excise duty on clothes before 2004, but it was for process houses and not traders. Under GST, they have included everyone, be it retailer, wholesaler and semi-wholesaler among others. This is a big issue which has to be addressed by the government.

When it comes to production, composite units do everything on their own; so taxation is low. But in the powerloom sector, there are works such as dyeing, embroidery and other such segments which are outsourced. So, in powerloom for every job work there will be taxes; hence, competition with composite mills is not possible. Only 5 per cent of Indian production is done by composites, and the rest by powerlooms. The other reason is that textiles is a credit-oriented trade. The payment is made only after six months whereas the tax has to be paid every month for which working capital will have to be increased. To claim input tax is very difficult and a lengthy procedure. In textiles, every month new designs are introduced in the market. We will have to incur losses for selling goods at a discounted rate because the government will not give input for losses, and being a credit-oriented business, nearly 0.5 per cent of the turnover will be bad debt which will be compensated from the profit. As a result, nearly 25 per cent of middle and lower level traders will be unemployed.

The rate should be industry-specific and not value-specific. Every product’s price is defined by its value; so, irrespective of it being lesser or greater than Rs 1,000, the GST rate should be same. Also, one has to understand some unique characteristics of the industry. For instance, many brands in the garments industry have size-difference pricing, and also a lot of brands are available in more than one product categories, where some are below Rs 1,000 and some above Rs 1,000. Such differential rates lead to more amount of compliance and unnecessary hardship. Also, this isn’t helping end consumers in any case. At retailers’ end, the MRP for borderline products has increased by almost 10 per cent.

 

Published on: 20/08/2017

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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