Textile: Treading Cautiously
Small companies and traders are still grappling with clarity
Photo Credit : Umesh Goswami
The business is not doing well for Manish Kumar. In the past two years, he has reduced his workforce from 200 workers to mere 15. He runs an apparel manufacturing unit at Mayapuri, a major hub of small scale industries in West Delhi. Like other owners in the hub, Kumar, too, is concerned about the upcoming GST structure. “The movement of products will slow down. We could lose our competitive edge in the global arena,” says Kumar who runs Himshakti Exports. Under the new provision, a manufacturer should fill a GST form online for transporting goods from godown to factory worth more than Rs 50,000. The goods will not be transported unless it is approved.
Also, industry veterans point out that the fabric manufacturers, who operate under the composition scheme of taxation for which the input tax credit (ITC) is not available will face challenges as the apparel manufactures will prefer to deal with GST-compliant fabric suppliers to avail ITC. “We need to find new fabric manufacturers who are GST compliant. Leaving old associations will impact our daily business needs. Also, the wait for approvals will hamper our chances to survive competition from China,” says Kumar.
Moreover, there was no levy of excise duty in textile sector in the past 13 years. The medium and small scale enterprises weren’t dealing with excise duty filing procedure at all. “We need to understand and learn the duty filing procedure. We are happy that government has given us the window of two months for compliance,” says Tony Uppal, promoter of Pee Empro Exports, a garment exporter with annual revenue of Rs 300 crore. While exporters will receive the refunds of the duties filed, manufacturers are anticipating delays in the refund of the duties.
Businesses are hiring people for the accounts department. “There are no other preparations or challenges that we have faced yet. However, with the roll-out of GST we may start facing the shortcomings,” says S.K. Nair, former secretary general of Confederation of Indian Textile Industry. “The industry has put all expansion plans on hold as they want to see how GST rollout will impact their businesses.”
The impact of the GST is likely to be neutral to positive across segments in the textile industry compared to the current tax regime, rating agency ICRA has said. “Considering that the GST rates announced for the textile categories are more or less in line with the existing effective tax rates,” ICRA does not envisage any impact on these product categories.
Large, organised players welcome a pragmatic GST framework for the industry with a tax slab of 5 per cent for fabrics and 12 per cent for branded apparel. They believe, that the GST rate of 5 per cent is apt for the category of readymade garments priced below Rs 1,000. “We have been working closely with our trade and channel partners on GST preparedness for the last six months. Our technology and ERP platforms are being upgraded to manage smooth transition and ensure compliances,” says Sanjay Behl, CEO, Lifestyle Business, Raymond.
Till second week of June, in Surat, the country’s man-made fabric hub, around 65,000 shops, textile markets and powerloom weavers observed a complete bandh. Traders say that there are complexities in the GST rates. However, the industry is now eagerly waiting for GST roll out and it is confident that, in the long term, the tax will create more jobs and value for the industry.