The cloth trading community across India is trying to comply with GST norms which became effective from July 1, but is finding it tough to cope with a lot of confusion about the new tax regime.
The situation being witnessed at the Ahmedabad-based Maskati Kapad Mahajan Market which has more than 1500 registered cloth traders as its members.In other textile markets in different parts of the country like Bhilwara, Surat, Bhiwandi, Erode and other places also situation is not different.
“I am not aware of any GST helpdesks set up by the government. Because of the recent strike by cloth traders, it has become impossible to supply deliveries as well as maintain stocks. So our demand to the government is that the cloth trading community must be exempted from GST for two years – that is, up to 2019,” Maskati Kapad Mahajan Market President Gaurang Ramprasad Bhagat said, speaking exclusively to Textile Excellence.
“In fact, we already told the authorities that we have available premises at our market place, where a GST helpdesk and office could be set up as soon as the tax officials get their equipment. However, the tax authorities have not done this so far. In fact, even some of our members who had applied for GST account numbers long ago are yet to receive them.” Bhagat said.
He said that the trader community is interested in complying with GST. “However, it is practically impossible for us to comply with GST in merely 20 days. No trader or businessman will be able to do it. We need more time because we have not yet understood GST laws because it is a bit difficult to comprehend. Besides, every small trader cannot afford to employ a chartered account and a computer operator immediately. Perhaps, something can be done about it by pooling our resources to comply with GST norms,” he said.
He said that the trading community is not afraid of a small increase in the cost of doing business. The biggest problem which the cloth trading community faces today is that most of them are very less educated or practically illiterate, he said. “There is also a lot of confusion about GST rules. In fact, we had held a few workshops for our members where chartered accountants spoke. However, after these sessions, the confusion of the trading community only increased,” he said.
He said that all across India, there is a very big stock of cloth which runs into several crores of rupees in godowns of the trading community. “There is a big confusion as to how this stock should be taxed. In fact, even P D Vaghela, the IAS official who is the tax commissioner concerned with implementing GST in Ahmedabad is confused about how to go about complying with GST regulations. It is this confusion which the trading community is worried about and there is not much concern about the cost of doing business, which could be managed,” he said.
He stated that there is already Value Added Tax (VAT) on yarn. When the fabric goes to the process house for dyeing, excise and VAT on the chemicals used for dyeing have to be paid. Then there is service tax to be paid. So, the stock of cloth which comes to cloth traders must be exempted from GST, he said.
“Our demand is that whatever tax has to be paid on cloth, make the GST rate zero. Our suggestion is to increase the GST rate on yarn to 10%, but keep the GST rate for cloth traders and garment traders at zero per cent. In any case, since the trading sector is under GST, income tax will have to be paid,” he said.
Erode Cloth Merchants Association President P Ravichandran from Tamil Nadu seems to have a similar story to tell. “Tamil Nadu’s case is very different from the rest of India. Here in Erode, all of us are already under GST in the sense that we have GST account numbers. So, we have already complied with GST regulations. The real problem is that we are still confused about GST regulations and even the GST officials are confused! Actually, we have a lot of doubt even today though we held a meeting with GST officials on June 29 before GST was rolled out,” Ravichandran said.
He said that GST rules are extremely stringent. “If anybody makes a mistake even inadvertently, a penalty of Rs 10,000 will be imposed. Three forms have to be filed every month. We have to verify whether the supplier is paying GST or not. There are a whole new set of rules and regulations under GST with which we have to comply. The fact is that the government failed to prepare us adequately for GST. The government merely gave us some free GST software to download. It does not end with simply downloading the GST software. It has to be used by somebody who is familiar with GST norms with which nobody is really familiar. Even the accounting procedures have changed and the government has made us its accountants for all practical purposes,” he said.
He said that according to a government survey itself, the textile industry profit margin does not exceed 4%. “So we have made a demand that only yarn must be taxed to even 15% because this will make it easy for everybody. In any case, GST rules are very strict. Under GST laws, if a notice is served on anybody, the government has powers to stop even the sale of immovable property. They can freeze the GST number or even the bank account, according to the GST Act. If somebody is not registered under GST, nobody can do business with him as per GST rules. So we have to be extra careful. The ease of doing business is gone. We also feel that the tax structure under GST is against the interest of small and medium businesses”.
However, presently, the cloth or fabric trader community seems to be struggling to comply with GST norms which they find confusing as well as cumbersome.