There were mixed reactions from the trading community in Surat when asked to respond to the ongoing agitation against imposition of GST on textile trading units across the country. Whereas the GST Sangarsh Samiti was of the opinion that the traders were receiving support from other states too including Delhi, and are in a position to mount pressure on the government, some of the traders in the formal sector opined that it would be foolish to expect the government to repeal GST on textiles and the agitation had already resulted in significant losses to the textile trading merchants at various stages.
Manoj Lakhotia when asked to voice the exact nature of grievance, explained, “We are not even used to filing VAT. It’s difficult for us to transition to the GST regime. Nearly 75% of the textile traders in Surat are from the medium scale and they will all perish as they would not be able to maintain the cost of hiring a chartered accountant with a hefty salary package to handle 36 submissions that take place per year. For the big players it won’t make much of a difference. However, smaller players who have been carrying on for years will abruptly perish.”
Giving a contrary opinion, a formal player in the garment sector who did not wish to be named, said, “This will not affect the formal sector much. The informal sector or dho number wala who has been minting money will fall into the tax dragnet in a big way.” Though there are differences of opinion among the trading community in Surat, all the traders have unanimously lent their support to the agitation in one voice.
Manoj when asked to explain why the fabric traders had problems even with 5% GST and opposed it so vehemently had this to say: “We are willing to pay taxes. However, you have to understand that the credit obtained by garment purchasers in the textile industry is usually backed by a turnaround time of six months whereas in other industries the time is just one month. Secondly there are many garment shops that return the unsold garments. This again creates a mess as the seller has to pay GST on all the garments procured for sale and there results confusion on how to reclaim money for garments returned. GST has to be paid against all the credit inputs and only at a later stage rebate can be claimed. This again demands enhanced capital requirements.”
“We will be happy even if the government imposes higher taxation at Yarn stage or the final readymade garment stage. However, implementing GST at every stage creates a lot of confusion and nuisance as we have to make remittances at every stage of purchase of raw materials and sale of fabrics. It’s too cumbersome and time consuming for medium business houses to carry out their trade activities efficiently,” he added.
Recently the traders’ body had a meeting with the union government’s minister of state for Road Transport Mansukh Mandaviya who gave them an assurance that their grievances will be brought to the notice of the GST council and an amicable redressing will be sought.
The player from the formal sector, even though formally supporting the garment strike, said on condition of anonimity, “We don’t expect any repeal of GST at this stage. The rule has already been implemented and we understand that the government wants to broad base their tax structure from a future perspective. However, the onus of final pricing of the products will ultimately be borne by the members of the public as we are not in a position to buffer the tax requirement. I would not know much about the export segment.”
The reactions are in sharp contrast to the demands made by industries working in the man-made fiber sector who wanted their GST levy to be scaled down from 18% to a reasonable 12%. Traders on the ground and players in the formal sector have a different view than that of the major players in the MMF sector.