Power loom weavers in Surat and other parts of India are right now faced with a crisis situation according to a release issued by the Federation of Indian Art Silk Weaving Industry (FIASWI). The federation expressed serious concern over cost escalations in the post-GST regime. According to the federation, the Post-GST regime has engendered very high cost escalations at the fabric stage that has resulted in increased job loss and massive import of fabrics.
The federation attributed the cost escalation to the non-refund of accumulated tax credit in the post-GST regime. The federation voiced the grievance that the center which was already earning INR 10,000 crore in the form of tax revenue accrued from yarn spinners in the pre-GST period, had in the post-GST regime doubled the revenue earnings whereas the Man-made Fiber (MMF) sector was left in the lurch.
The sector faced a mammoth loss due to significant slice of its capital facing a chop owing to non-refund of input tax credit. The federation highlighted the point that all other textile sectors barring the MMF sector were allowed to get refund of input tax credit. “This is gross injustice to the MMF sector,” a federation spokesperson said. While yarns face a GST of 12%, fabrics are faced with 5% levy. The non-refund of input tax credit implies 7 percent of accumulated tax credit is uncompensated for, when it comes to the power loom weavers.
“The accumulated losses by a rough estimate runs into several thousands of crores for the MMF sector,” said the spokesman.
Chairman of the federation, Bharat Gandhi expressed the view that the textile industry would be faced with an escalation in costs ranging between 3 per cent and 5 percent. This would seriously affect the capacity utilization, he added. Moreover, for sectors like power loom and handloom, the percentage escalation will be in proportion to the slab that covers accumulation of input tax credit on sale value.
An Annual General Meeting of the federation will be held on January 6, 2018. In the AGM, the textile sector representatives from various geographical locations across India like Salem, Maharashtra, Tamil Nadu, Karnataka and Mumbai will be present. The core agenda of the AGM will be to discuss and debate the problems faced by the textile sector under the new GST-regime.
Timely refund of input tax credit will ensure that the textile industry avoids cost escalation, preempts high import of fabrics and avert dip in capacity utilization. As of now, Surat’s weaving industry has shut down over one lakh power loom machines. The losses resulting from the shutdown have according to estimates crossed the INR 3,000 crores-mark. Surat happens to be the biggest manufacturing center for man-made fabrics in India.