Struggling handloom industry alleges harm from GST, claims weavers and craftsmen
The handloom and handicraft sector, a vital part of India's economy, is urging the government to reconsider its Goods and Services Tax (GST) policies. A memorandum, signed by over 1,000 handloom houses, weavers, and artisans, was submitted to the Finance Minister, highlighting the severe impact of the current GST rates on this sector.
The memorandum argues that the 5% GST on handlooms and up to 28% on handicrafts has been detrimental to the "Make in India" initiative. It is worth noting that this sector supports millions of vulnerable rural artisans and millions of self-organized producers who depend on the handmade economy for their subsistence.
The memorandum further suggests that the government could potentially avoid any loss if a no-GST approach were taken for this sector, as GST collections from the handmade sector are almost negligible. The memorandum also proposes the introduction of separate and simplified HSN codes to distinguish handmade products from machine-made ones.
Independent expert Donthi Narasimha Reddy, a renowned figure in the textile industry, supports this call. He stated that the allocations to the handloom sector are very low. He also pointed out that the sector invests more than ₹25,000 crore annually in procuring cotton yarn and ₹9,500 crore in dyes and chemicals.
The use of natural materials, handmade techniques, and processes can be factors for implementing the zero GST system. It is worth mentioning that small machines used by handloom, such as small-scale reeling machines or winding machines, are subject to a 18% tax. However, these producers do not fall into the GST category but bear the input tax on raw materials, dyes, value additions, and accessories.
The memorandum also suggests creating separate HSN codes for tracking sales of handmade products despite GST not applying to them. This could potentially enable the government to monitor the growth and impact of the handmade sector more effectively. The zero GST system could potentially take effect after a significant turnover in the case of a formal entity.
The government is currently considering a major overhaul of the GST, providing an opportunity to address these concerns and support the handloom sector, which is largely informal. The handloom houses, weavers, and artisan groups are hopeful that their call for abolishing GST on handwoven textiles and handicrafts will be heard and that they can contribute more significantly to the "Make in India" initiative.
