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Video Editor: Mohd Irshad Alam
“I used to run 36 looms on rent, but my business tanked after GST came into effect. After incurring a loss of over Rs 2 lakh, I am out of the business and have resorted to selling tea,” said an exasperated Nikul Patel, who runs a tea stall right next to the industrial estate where he ran his loom unit in Pandesara area in Surat, Gujarat. Nikul is one of many unit owners in Surat who’ve been forced to shut shop within a year of the introduction of the 5-18% Goods and Services Tax (GST).
Often called the ‘Manchester of India’, Surat is the textile hub of India and houses small and large zari, embroidery, cloth and textile industries. The Quint travelled to Surat to understand the impact of a major tax overhaul in India’s once-booming textile sector.
Kalpesh Patel is a loom owner and somehow manages to keep his head above water but claims that his turnover has dropped from Rs 50 lakh per month to a paltry Rs 2-3 lakh per month – a whopping 96 percent drop.
As per the GST law, power looms have been barred from seeking any input tax credit refund. Last year’s protests stalled all work for a period of 20 days leading to a loss of over Rs 100 crore across the market. The Modi government at the time was undeterred but announced a cut in GST rates just days ahead of the Gujarat elections in December. However, the blow did not soften.
Power loom units in Surat’s Pandesara area are either partially operational or running below capacity. Others are being sold in scrap.
“A loom unit like the one behind me with 70 machines can manufacture over one lakh meter of cloth. But many unit owners have sold their loom machines as scrap”, says Kalpesh Patel.
Zari, which goes into making expensive Benaras and Kanchipuram sarees has also been burdened by GST.
The industry which is indigenous to Surat, was taxed 12 percent and the rate was kept uniform for both genuine and imitation zari. After several sittings, the GST council reduced the 12 percent tax to 5 percent GST on genuine gold and silver zari. But, the manufacturer still has to pay Rs 2000 as GST on every 1 kg of zari which costs roughly Rs 40,000.
Another set of people who’ve been badly hit are people who were working from home. There are two types of workers in the textile business – those who work in individual units and earn daily or monthly wages, and workers who are given raw materials to process from home. In the industry parlance, this work-from-home system is referred to as ‘job-work’.
And the GST did not spare them either.
“The government should either phase us out of GST, since we already pay close to 18 percent GST on raw material such as copper or keep it as low as 3 percent, else our businesses are doomed,” Bipin Jariwala added.
The dingy alleys on AK Road, behind Surat railway station are now quieter with the shutting down of thousands of embroidery units. Just like the power loom sector, unit owners here are selling their machinery for scrap as they are not able to manage the GST burden. As a result, an industry that paid wages to a million labourers, today employs only around three lakh workers.
Rajni Patel, treasurer of Embroidery Association said, “Today our employees are sitting at home in their villages, and unit owners are opening shop twice a week. Those who cannot keep their businesses running are selling their machines for cheap. Machines costing Rs 10 lakh are being sold for Rs 2-3 lakh. That is a 70 percent capital loss.”
Bhola Singh hails from Bihar and works in Surat at an embroidery unit. He tells his friends not to return to Surat as there are no jobs for them here.
There was a time when the Surat Ring Road near the railway station had to deal with choc-a-bloc traffic on a daily basis as reams of cloth and other finished products entered the massive markets from godowns across the state and the country. Now traffic outside the market flows smoothly while the businesses inside stand stifled.
Pawan K Chaudhury is a textile trader from Surat Textile Market and had entered the business only five years ago.
“Around 200-350 shops have shut down. All we can think of is saving every penny and completing the paper work, which in itself is a herculean task. I was employed elsewhere earlier, but then I decided to start my own business. It was challenging, but fun till about two years ago. But everything changed with demonetisation and GST,” he says
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