On December 10, more than 4,000 textile wholesalers, retail shops, producers and merchants dealing with yarn went on strike in Chennai. The strike was called for by the Erode Cloth Merchants Association against the Finance Ministry’s decision to increase the GST on various kinds of textiles, footwear, and apparel by 7 percent, spiking the erstwhile 5 percent GST to 12 percent, to be effective from January 1, 2022.
The same notification, issued on November 18, stated a decrease in the rates of synthetic yarns and fibres from 18 percent to 12 percent. The revision was justified as a move to bring uniformity in tax rates across the textiles sector and also to eradicate distortions owing to the inverted duty structure.
“It is probably a great initiative for the accountant to make it easy by putting a single tax amount on everything that has to do with the textile, from yarn, fabric, to garment accessories, but for the manufacturer and the consumer, it will be way too difficult,” said Sreejith Jeevan, founder and designer at Kerala-based brand Rouka, expressing concern.
He added that it would not only become expensive to manage or run production but also make it very difficult to market an already labour-intensive product since the costs would go way up.
P Ravichandran, former president of the Erode Cloth Merchants Association, agreed with Indianexpress.com from his closed-down offices. In Erode, where the association functions for the welfare of the different local stakeholders of the textile industry, the distressed weavers, small-scale mill owners, and local retail shop owners, among others, also pulled down their shutters for a day to protest against the hike. “There is a huge rise in the price of cotton yarn, nearly 30-40 percent. In addition, the government is proposing a 7% increase in the GST.”After the pandemic, the increase in prices of chemicals for processing, as well as Chinese imports going down, lots of spinning mills have gone bankrupt in the last two years,” said Ravichandran, whose association is demanding a restoration of the earlier 5 percent GST rate.
Craftspeople in Telengana, too, are unsure how they will make ends meet, with profit margins already low at 2-5 percent on average.From the heart of Pochampally, Karnati Narasimha of Vikas Handlooms, which weaves the Pochampally ikat saris that are coveted across the country, worries that the weavers and artisans working under him might abandon the craft. As it is, Narasimha’s loom, like many other small looms from the unorganised sector, is facing minimal sales.
Small-scale brands and initiatives that work with craft clusters have also been thrown off course. Ilamraa, a Hyderabad-based brand that works with the traditional Kalamkari craft practised by third generation artisans in Pedana, Andhra Pradesh, was previously charged a 5% GST by its raw material suppliers, but that is set to change soon.
“Our fabric unit is now going to charge us 12 percent, which automatically increases the pricing, which we are yet to figure out how to deal with, as a sudden increase in product pricing may not be the best option. As a small business, taking a hit to our margins is not an option, according to co-founder Yashila Nara. She added that in a sudden change of tax structure like this, the sustainable market space is especially impacted because “the intersection of competitive market pricing and affordability is tricky, and this would only make it difficult.”
Sustainability products are already on the higher pricing side, and to accommodate rising taxes would mean either making changes to production (like shifting from limited pieces to bulk that might cut costs), or letting go of a section of the customer base; the former compromises on sustainability values, while the latter does not allow the brand to grow. Both factors are deteriorating in many ways, “she continued.”
