Statement issued by Shri Randeep Singh Surjewala, S. Manpreet Singh Badal and Shri Krishna Byre Gowda
UPA-Congress Government introduced 115th Constitutional Amendment Bill in the year 2011 to make GST a reality in India. Shri Narendra Modi, the then Chief Minister of Gujarat and BJP opposed it for seven long years. Entire spirit, direction and purpose of the GST Bill introduced by UPA-Congress were – ‘Single, Transparent and Uncomplicated Taxation on Goods & Services’ & ‘Reduction of Prices’. On the contrary, GST pushed by BJP is a ‘7-Tier Tax Structure’ (0.25%, 3%, 5%, 12%, 18%, 28%, 40%) and ‘Extremely Complexed Multi-Form Filings’ (37 per year) making it cumbersome and hitting at livelihood of shopkeepers, traders, micro & small businesses, farmers and common men of the country.
Congress Vice-President, Shri Rahul Gandhi visited Gujarat on 4th September, 2017 wherein shopkeepers, entrepreneurs and representatives of unorganized labour involved in the field of textiles, embroidery, jewelry etc. explained the insurmountable loss of jobs as also loss of livelihood, besides the unprecedented suppression by the BJP government by calling in Army and police to beat up the Surat traders. Similar is the situation in Bhiwandi & Malegaon (Maharashtra), Ludhiana (Punjab), Tirupur (Tamil Nadu) and other centres. Congress Party is committed to raising this important issue of livelihood, employment, trade & business in the meeting of GST Council scheduled for 9th September, 2017 at Hyderabad.
The Central government has claimed a total GST collection of close to Rs.92,000 crore for the month of July, 2017. These collections camouflage nearly Rs.30,000 crore to Rs.40,000 crore of likely taxes that were available as transitional credits, but could not be taken because of the glitches in GST network and confusion created by the government. Net of these credits tax collections would be far less creating serious doubts both about the GDP growth as well as tax numbers.
Livelihood in Textiles Sector under attack
Textiles i.e. micro and small manufacturers, traders, cloth merchants and shopkeeper combined together are the second biggest job generators after agriculture. They are the hardest hit by the distorted duty structure of GST that will hit millions of small power looms as GST tax structure has been designed only to help integrated plants in this largest sector. Similar is the fate of cloth merchants, traders and shopkeepers.
Manmade fibers are nearly 60% of Indian fiber demand. Manmade fiber and yarn, dyeing and printing units and embroidery are being taxed at 18%, while rate on the end product i.e. fabric is only 5%. This is proving to be a death knell for the small & micro non-integrated textile players, while helping only the biggest fish to sustain.
For example; if you produce yarn to make fabric, you have a great advantage. If you buy yarn from the market to make fabric (done by 80% of power loom industry), your cost is much higher. Net result is that the entire small and micro industry is severally hit as only only integrated players will stay, while non-integrated players evaporate. To give another example, if one kg of manmade yarn costs Rs.100/-, an integrated player will sell the yarn to a non-integrated at Rs.100/-, which will further attract 18% tax. After taking into account this tax and value addition of Rs.20/-, cost of fabric will be Rs.138/-(100+18+20). Considering 5% duty on fabric, garment maker, while purchasing fabric, will sustain a cost of Rs.145/-. Against this, for an integrated player, cost would be much less at Rs.126/-.
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. Those with integrated plants from yarn to apparel (like Arvind, Raymond) suffer no loss whatsoever as they will be able to recover entire tax credits. The tax rates are, thus, totally mindless, help large businesses, hit Indian fabric manufacturers in general and result in shutting down of small businesses.
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. The strike in the textile sector has already caused an estimated loss of nearly Rs.40,000 crore across the country and loss of nearly 15 lakh jobs. Considering that 12 crore people are engaged in the textile sector, it could be a huge set back for the economy if not redressed appropriately.
Government must consider to provide appropriate relief to save this most important employment generator and economic contributor to India’s economy. Even otherwise, the exemption limits for traders need to be raised from existing Rs.20 lakh to Rs.1 crore and for manufacturers from Rs.50 lakh to Rs.2 crore. As implemented by the previous Congress-UPA government, optional scheme for textile sector needs to be considered with benefit of input credit refund for weavers with job work arrangement and exempt in the common job workers, who principally operate in the organized sector. Congress Party stands committed to taking up these issues in the GST Council through the Finance Ministers of Congress-ruled States.