GST impact worries Tamil Nadu’s textile cluster

Erode cloth merchants are planning an indefinite strike from Wednesday if Centre doesn’t accept its demand to withdraw 5% GST on textile goods

Chennai: Tamil Nadu’s textile cluster, which includes Coimbatore, Erode, Tirupur, Salem, Namakkal and Karur, is discontented over the goods and services tax (GST) rate of between 5 and 18% imposed on textile manufacturers, including job workers who were so far exempted from any form of tax.

While the principal manufacturers are to pay GST at 18%, job workers will have to pay 5%. Job-workers produce goods on behalf of principal manufacturers using raw materials supplied by them. The GST council had initially clamped 18% tax on job work too but reduced it to 5% following protests.

The Erode Handloom Cloth Merchants Association, which is again appealing to finance minister Arun Jaitley to withdraw the 5% tax levied on textile goods, is planning an indefinite strike from Wednesday if its demand is not accepted.

P. Eswarmoorthy, secretary of the Chennimalai Powerloom Association, said the powerloom sector will be badly hit by GST. Chennimalai, in Erode district is a handloom and powerloom hub, employing over 15,000 people. Erode district has more than 3 lakh people directly or indirectly involved in the sector.

“The powerloom sector at Chennimalai is more of a cottage industry and more than 80% of the products are sold in weekly shandies,” said Eswaramoorthy.

“The government should have at least streamlined the process in a phase by phase manner before implementing it. This sector is already struggling and for something that remains as an unorganized sector, the GST taxation procedure is too complicated, Eswarmoorthy said, pointing out that the textile industry is the second largest employer after agriculture in the country.

Tirupur, a knitwear and hosiery hub which achieved an export turnover of Rs25,000 crore and domestic turnover of Rs12,000 crore in 2016–17, is dependent on job works at various levels of garment manufacturing for more than 80% of its production.

The industry is still trying to break even after demonetisation and the hurried implementation of GST without any preparedness has made things worse, said an industrialist from Karur, which is a hub for home furnishing textiles. He spoke on condition of anonymity.

Tamil Nadu accounts for one third of the textile business in the country. While the powerloom sector in Tamil Nadu provides employment to around 9.14 lakh workers, there are over 1800 textile and spinning mills located in the state, as per the state government.

The Southern India Mills Association (SIMA) had expressed disappointment over the centre for not considering its demand of reducing the GST rate of 18% on man-made fibre and that on blended spun yarn to 12%.

Some industrialists also said that since Tamil Nadu had been opposing GST for a long time, the state government was not prepared for its rollout.

Recently, leader of the opposition and working president of Dravida Munnetra Kazhagam (DMK) M.K. Stalin blamed the state government for not having created awareness among traders, which has led to protests against the GST in the textile, fire crackers, entertainment and other industries.

The textile industry in Tamil Nadu which had joined the other states on a three-day strike against GST rates, also demanded that the state government remove certain municipal taxes, which will be a burden in addition to GST.

The tax on the job works will mean a huge burden on the Micro, Small and Medium Enterprises (MSME), which form a huge chunk of the state’s substantial textiles sector. Job workers, who are the core of the industry and are largely part of the unorganized sector, have been brought into the tax net for the first time, a move that would hurt the sector say industry stakeholders.

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