The GST regime’s adverse effects have affected the handicraft industry of India for a long time. The sector is connected to the cultural heritage and rural livelihoods. The industry has declined to 53% between 1996 and 2010, as per the census data, and today, artisans encounter issues in the existing tax structure.
In GST classifications, the words Handmade or Handicraft are not present, which leaves the sector without specific recognition. References to the handloom are there the industry leaders assume the unique identity of handicrafts needs appropriate acknowledgement to ensure proper taxation and safeguarding of livelihoods.
Artisans Seek GST Rate Cut on Handicrafts
After the Union Budget 2020 presentation in the Parliament, the constantly increasing Budget 2020 proposals encounter appeal by handicrafts as well, for the higher tax relief, so that the sector can combat the adverse financial effects of the Goods and Services Tax (GST) rates and economic slowdown.
In the country, artisans and associations will continue to demand a GST rate reduction on handicraft products. The majority of the handicrafts in the earlier VAT regime have encountered a 4% levy, and under GST, the rates vary from 5 to 18 percent, as per the item. The same has caused confusion, reduced affordability, and directly affected sales. Small and medium-sized units, which provide support to the industry, are struggling to survive, with many reporting a 20% reduction in turnover.
56th GST Council Meeting Update for Handicrafts
The GST Council has decided to reduce the GST rate on handicrafts from 12% to 5%. The revised rate will be applicable from 22nd September.
| Handicrafts List | New GST Rate From 22nd September |
|---|---|
| “Idols of wood, stone [including marble] and metals [other than those made of precious metals]” | 5% |
| “Statues, statuettes, pedestals; high or low reliefs, crosses, figures of animals, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paper weights, artificial fruit and foliage, etc.; other ornamental goods essentially of stone” | 5% |
| “Statues and other ornamental articles” | 5% |
| “Worked ivory, bone, tortoise shell, horn, antlers, mother of pearl, and other animal carving material and articles of these materials, articles of coral (including articles obtained by moulding)” | 5% |
| “Paintings, drawings and pastels, executed entirely by hand, other than drawings of heading 4906 and other than hand-painted or hand-decorated manufactured articles; collages, mosaics and similar decorative plaques” | 5% |
| “Original engravings, prints and lithographs” | 5% |
| “Original sculptures and statuary, in any material” | 5% |
| “Collections and collectors’ pieces of zoological, botanical, mineralogical, anatomical, historical, archaeological, paleontological, ethnographic or numismatic interest [other than numismatic coins]” | 5% |
| “Antiques of an age exceeding one hundred years” | 5% |
| “Handbags including pouches and purses; jewellery box” | 5% |
| “Handbags, including pouches and purses; jewellery box” | 5% |
| “Wooden frames for painting, photographs, mirrors etc” | 5% |
| “Statuettes & other ornaments of wood, wood marquetry & inlaid, jewellery box, wood lathe and lacquer work [including lathe and lacquer work, ambadi sisal craft]” | 5% |
| “Art ware of cork [including articles of sholapith]” | 5% |
| “Handmade/hand embroidered shawls of sale value exceeding Rs. 2500 per piece” | 5% |
| “Stone art ware, stone inlay work” | 5% |
| “Tableware and kitchenware of clay and terracotta, other clay articles” | 5% |
| “Statuettes & other ornamental ceramic articles (incl blue potteries)” | 5% |
| “Ornamental framed mirrors” | 5% |
| “Glass statues [other than those of crystal]” | 5% |
| “Glass art ware [ incl. pots, jars, votive, cask, cake cover, tulip bottle, vase ]” | 5% |
| “Art ware of iron” | 5% |
| “Art ware of brass, copper/ copper alloys, electro plated with nickel/silver” | 5% |
| “Aluminium art ware” | 5% |
| “Bells, gongs and like, non-electric, of base metal; statuettes, and other ornaments, of base metal; photograph, picture or similar frames, of base metal; mirrors of base metal; (including Bidriware, Panchloga artware, idol, Swamimalai bronze icons, dhokra jaali)” | 5% |
| “Handcrafted lamps (including panchloga lamp)” | 5% |
| “Furniture of bamboo, rattan and cane” | 5% |
| “Dolls or other toys made of wood or metal or textile material [incl wooden toys of sawantwadi, Channapatna toys, Thanjavur doll)” | 5% |
| Ganjifa card | 5% |
| Worked vegetable or mineral carving, articles thereof, articles of wax, of stearin, of natural gums or natural resins or of modelling pastes etc, (including articles of lac, shellac) | 5% |
| Hand paintings, drawings and pastels (incl Mysore painting, Rajasthan painting, Tanjore painting, Palm leaf painting, basoli etc) | 5% |
| Original sculptures and statuary, in metal, stone or any material | 5% |
| Handmade Paper and Paper board | 5% |
GST Challenges in the Handicraft Industry
- Multiple GST Slabs: Raw materials and finished goods fall within different slabs, raising the costs of production.
- Tax Compliance Burden: GST registration should be crucial for small artisans selling interstate, also they need to maintain HSN codes, and issue invoices, tasks that many traditional weavers and craftspeople find difficult.
- Delays in Refund: Severe working capital blockages have been encountered by the exporters, particularly in hubs like Jodhpur and Varanasi, because of the late GST refunds. As per the reports, thousands of crores remain stuck, which is impacting international competitiveness.
- Awareness Gaps: In the survey, it was found that nearly 90% of artisans are not aware of the refund process, and 75% are not known of applicable tax rates.
GST Refunds Blockage Impacted Handicraft Exports Industry Heavily
With the continuous blockage in GST refunds for the handicraft export industry, the sales have been reduced to 50% in the five months after GST implementation. The Jodhpur Handicrafts Exporters’ Association revealed data that Rs. 450 Crores have stuck with GSTN from July to December. Consequently, the working capital of exporters is not performing anything and has been blocked by the new tax regime.
Read Also: How to File GST Refund Claims Manually? Step by Step Guide
The director of the association discussed the issue with the finance secretary, Hasmukh Adhia, and the GST experts committee. If nothing has been done to improve the refund mechanism immediately and exporters do not receive the promotion scheme, then the export industry can be in danger. Further, the association demanded 100% relief from income tax liability.
3 Reasons For Failure In the Refund System
- The label 6a on the GST portal and the shipping bill entry on the custom EDI are not matching with each other
- The new system has become a hurdle for traders
- Form GST RFD-1 A is available on the GST portal but assessees are not able to submit this form
GST Refunds Causing Problems for Handicrafts Businesses
The Exports Promotion Council for Handicrafts has given information that, due to many problems in GST refunds and a weak International market, the Handicrafts export business will be 3.5% less than the previous financial year. Council Chairman O.P. Prahladka had pleaded to the government to solve the GST refund problem as early as possible so that the exporters can be free from the cash problem. He also said that Handicrafts Exports of 3500 crores are stuck because of GST, and they mostly belong to small exporters.
Prahladka has said that the government has still not decided on the GST refund date. And the higher interest rates have caused the exporters to do business with very limited capital because they can not borrow more loans from the banks. He also asked the government to increase the interest subsidy from 3 percent to 5 percent.
Commonly Asked FAQ’s Regarding the Handicraft Industry
Q.1 – What are the provisions to get a refund under GST regime?
The refunds are covered under CGST Act, 2017, IGST Act, 2017 and other SGST/UTGST Acts. It includes refunds on zero-rated goods supplies and services given to making these zero-rated goods
Q.2 – What is the time-constraint in getting refunds?
It is refunded before 60-days from the application for refund is formed
Q.3 – Is it necessary for the services provider to register under GST?
If the supply of services is exceeding the threshold of 20 lakhs or in another case 10 lakhs, then it is mandatory to register for the services you are providing
