Is the 7% GST hike on textiles and clothing at odds with “Vocal4Handmade” promises?

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On December 10, more than 4,000 textile wholesalers, retail stores, producers and yarn merchants went on strike in Erode, Chennai. The strike was called by the association of Erode cloth merchants against the Ministry of Finance decision to increase the GST on various types of textiles, footwear and clothing by 7 percent, reducing the old GST from 5 percent to 12 percent, effective January 1, 2022.

The same notification, issued on November 18, reported a reduction in the rates of yarns and man-made fibers from 18 percent to 12 percent. The revision was justified as a measure to standardize tax rates across the textile sector and also to remove distortions due to the reverse tariff structure.

But what does the textile industry think?

It’s probably a great move for the accountant to make things easier by putting a single tax amount on everything has to do with textiles, from yarn, fabric to clothing accessories, but for the manufacturer and the consumer it will be way too difficult, ”said Sreejith Jeevan, founder and designer of the Kerala-based brand, Rouka, expressing concern.

“Not only will it become expensive to manage or run production, but it will also be very difficult to bring an already labor-intensive product to market, as the costs would increase dramatically,” he added.

Former Erode Cloth Merchants Association President P Ravichandran, who spoke with indianexpress.com of its closed offices. In Erode, where the association works for the well-being of the various local actors of the textile industry, the weavers in distress, the owners of small factories, the local traders, among others, also lowered their shutters for a day to protest the hike. . “There is a huge increase in the price of cotton yarn, almost 30 to 40%. In addition, this government is proposing to increase the GST by 7%. After the pandemic, the increase in the prices of chemicals intended for processing, as well as the drop in Chinese imports, many spinning mills have already gone bankrupt over the past two years, ”said Ravichandran, whose association requests the reinstatement of the previous 5% GST rate. .

At Telengana, too, artisans are clueless about how they will make ends meet with already low profit margins, 2% to 5% on average. From the heart of Pochampally, Karnati Narasimha of Vikas Handlooms, who weaves Pochampally’s ikat sarees that are coveted across the country, fears the weavers and artisans working under him will abandon the craft. As it stands, the Narasimha loom, like many other small looms in the unorganized sector, faces understated sales.

A Pochampally saree woven by a craftsman at Vikas Handlooms.

“The prices of colors and zaris will increase, making the production cost higher. We only get a 5% margin on saris; if we pay 12 percent GST, how can we make a profit? Narasimha expressed.

Small-scale brands and initiatives that work with craft clusters have also been shaken by the move. Hyderabad-based Ilamraa brand that works with the traditional Kalamkari Handicrafts made by third generation artisans in Pedana, Andhra Pradesh were previously charged at 5% GST by their raw material suppliers, but this is expected to change soon.

“Our fabric unit is now going to charge us 12% which automatically increases the price, which we haven’t figured out how to handle yet as a sudden increase in the price of products might not be the best option, but as a small business, neither takes a hit on our margins an option, “said co-founder Yashila Nara. She added that in a sudden change in tax structure like this, l he sustainable market space is particularly affected in which “The intersection of competitive market pricing and affordability is tricky, and that would only complicate matters.

hand block print Block printing by hand in the Ilamraa unit in Andhra Pradesh.

Sustainable products are already on the higher price side and adapting to rising taxes would mean either making changes to production (such as moving from limited parts to bulk parts that could reduce costs) or abandoning part of the customer base; the former compromises on sustainability values ​​while the the latter does not allow the brand to develop. Both factors are deteriorating in many ways, ”she continued.

Industry insiders agree this move appears to be at odds with the government’s # Vocal4Handmade social media campaign, launched on the 6th National Handcraft Day (August 7, 2020) “in partnership with all parties stakeholders, to promote India’s handloom heritage and to ensure popular support for the weaving community, ”according to the Ministry of Textiles.

“I feel like the right hand doesn’t know what the left hand is doing,” said Laila Tyabji, social worker, writer, craft activist and co-founder of Dastkar, an NGO that supports traditional artisans. “This is such a mistake, because one of the huge advantages of India at a time when people all over the world are waking up to natural hand-made fibers and environmentally friendly processes is that ‘it already has millions of people qualified in these processes. This is a time when we should invest in them and aim for international market growth for looms and natural fibers. Instead, we try to drive them out of existence, ”she said.

Dastkar has been pushing for the complete removal of the GST on textiles for three years, as already marginalized craft producers and weavers cannot afford it.

“The GST not only raises the prices of products, but is also a cumbersome mechanism for neo-literates to manage, and that’s another reason they leave the industry because it gets so complicated. This further increase is going to be a big blow, ”Tyabji added.

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