Will the government decide to keep the GST rate at 5% till the night of December 31?
From January 1, the rate of GST on all products of textile value chain is going to be 5 to 12 percent. By the way, textile traders across the country including Surat are opposing this decision of the GST Council and there is also a flurry of agitation. FOSTA, the largest organization of Surat’s textile traders, has also appealed in this regard in front of top officials including Union Finance Minister Nirmala Sitharaman. But there are indications from the government that the demand of traders to maintain the GST rate of five percent can be sidelined. If there is no official statement in this regard from the government till 31st December, then the notification of 12 percent GST rate on 18th November will be automatically implemented from 1st January. In view of this possibility, textile traders across the country are skeptical.
By the way, it is also necessary to look into the government side in this whole matter. There are some components of the overall value chain of textiles that are facing difficulties with respect to the inverted duty structure. Inverted duty structure is one when the tax on inputs and raw-materials exceeds the inherent tax on the output or final product. Businesses have to pay more tax on raw materials and less tax on final products. In such a situation, the government has to refund this additional tax later. Explain that the GST Council has resolved the problem of inverted duty structure in respect of many industries. But the problem of inverted duty structure in the textile, footwear, pharmaceutical and fertilizer industries still persists. The problem of refund of this additional tax for the traders is pending for a long time.
A Money Control report quoted Sanjay Jain, chairman of the Confederation of Indian Textile Industry, as saying that the textile industry, in which the manmade fiber and yarn sector is dominant, suffers from this problem of inverted duty structure. But the textile traders are unable to understand why the government is trying to trouble the remaining 85% of the sector to solve the problem of 15% of the industry affected?
Textile industry experts believe that with the increase in GST, small, medium and medium scale industries may have to deal with the pressure of working capital. Experts are also apprehensive that the proposed change in the GST rate may push lakhs of MSME entrepreneurs into the unorganized sector or may even bring an existential crisis. In this regard, Ashok Todi, Vice President, Bharat Chamber of Commerce, says that the uniform tax rate may make it difficult for such entrepreneurs who produce non-luxury/non-premium items to survive because of the cost basis. But the difference in the tax rate was like a lifeline for this class of businessmen.
On the other hand, textile experts are also of the view that due to the change in GST rate, the end end of the overall chain i.e. the product will become costlier for the consumer as the entrepreneurs will not be able to absorb this rising cost on their own. Small businesses are already affected by the economic damage and raw material costs incurred during the two Corona waves.
According to an estimate, due to increase in the rate of GST on the textile value chain, the government will get additional revenue of 7 to 8 thousand crore rupees. The average monthly revenue of the government from GST is around 1.25 lakh and this increase of 7 to 8 thousand crores will not benefit the government as much as the textile industry, which is second in terms of providing employment opportunities in the country. People will have to bear the economic pressure. It is also feared that this development of increase in tax may also have an adverse effect on a large number of employment opportunities.
Well, there is still a few days left in January 1. The textile leaders of Surat have already offered to the government and are expecting that till the night of December 31, the government will keep the rate of 5 percent while taking a soft approach towards the tax problems of the textile traders.