Imposition of 5% GST will badly affect Cottage Industries

  • Girish Malviya

The country is going to be doomed - ‘Très Bientôt’. The ever-increasing inflation will replicate in India a situation - like that of Sri Lanka. From July 18, 5 percent GST will be levied on many food products including unbranded pre-packaged pre-labelled flour, maida and semolina, pulses, curd, jaggery etc.

On March 23, 2017, the Union Finance Minister Arun Jaitley had said in the Rajya Sabha that the food items on which no tax is yet levied will be kept out of GST. But today in 2022, this decision has been reversed altogether.

Whenever governments bring any tax or tax reform related arrangements, they try to present it as ‘glasnost’ and ‘perestroika’, but the reality is seen only after a few years; As is being seen today in the case of GST.

Let us try to understand the impact of this decision to levy GST on unbranded pre-packaged and pre-labelled food items.

In fact, a multinational company sells its product at a higher price with a registered brand. Whereas small MSMEs or small flour mills sell their products at low prices and low profits. Perhaps, this has been a matter of grave concern for the Modi government, which acts slave to big industrialists. The cottage industry will be badly affected by the imposition of 5% GST. They will no longer be able to compete with the big brands. Inflation will definitely shoot up because with the introduction of GST, the prices of everyday food items will increase, many MSMEs will be closed due to 5 percent GST which will benefit big companies and this is what the Modi government wants. It is crystal clear that unemployment is going to increase in the unorganized sector.

The Confederation of All-India Traders (CAT) and other food organizations believe that all the big brand companies of the country cater to the needs of the highest echelons of society, the upper class and the upper-middle class which account for only 15 per cent of the country’s population. But the manufacturers who have their own network of local labels cater to 85 percent of the country’s population. In such a situation, with these items being listed for imposition of the GST tax, the burden of tax compliance on small manufacturers and traders will increase. Along with this, the items of daily necessities will also become expensive.

CAT even says that it is also a matter of regret that no business organization in the country has been consulted in this regard.

With the use of this term - ‘Pre-Packaged Pre-Label’ - by the government, it seems that farmers can also be affected by this decision because according to this term, the sacks in which a farmer packs his crops should also be taxed with GST!

The author is a freelance journalist.