We have already discussed the GST Impact over Handicraft industries that, how adversely it impacted the handmade products. Now, this article is about GST impact on the carpet industry. As we know that 18% rate imposition is there on Job work under GST and 12% rate imposition on the corresponding sale and purchase of goods. The heavy tax levied on shipments of handmade carpets and other floor covering items got drastic fall down and according to a trade body, the source of income of approximately 20 lakh workers and their families are on the test of existence.
CEPC Finding: GST Impact On Carpet Industry
In a research by Carpet Export Promotion Council (CEPC), feedbacks received from various manufacturers and industries involved in carpet making and assisting works within the country.
The following are the results of the finding:
- Almost 5,000 units within the country became dormant and about to close in near future
- Around 1,000 crore worth of exports of carpets and flooring stuff have been affected due to inoperability of manufacturing units
- Exports worth Approximately Rs. 2,000 Crore got annulled due to refusal from importers in paying increased cost of the items
- Under the ambit of GST impact on carpet industry, approximately 20 lakh workers and families are forced to manage anyhow with their livelihood
- No new order received in the past three months to buy carpets
- Old orders are cancelled due to the fear of GST imposition
- Old contractors are not offering increased price due to the insecurity of losing money
- The internal suffering of Indian carpet industry has become the advantage for other countries like China and Turkey as they are ready to fill the space left by Indian handicraft and carpet market internationally as a result of noncompliance to follow the GST structure
- The disequilibrium in the foreign exchange and balance of payment is surging as factory-made carpets are ready for import to dominate the Indian market due to the gap left by Indian carpets
- The four major states where the carpet industry has been affected a lot are, Uttar Pradesh, Haryana, Rajasthan, and Jammu and Kashmir
Read Also: GST (Goods and Services Tax) Impact on Common Man
Focus on Kashmir’s Carpet Industry
- Previously, the carpet and the handmade products were out of the tax ambit in Kashmir, but now weavers are liable to furnish 12% tax under the Goods and Services Tax after 1st July
- Carpet traders have explained that carpet making is a time-taking process as weavers need months’ and sometimes years’ labour to complete the items. The hard work and time duration is the factor in the cost of the handmade products and GST is just charging against 80% of the efforts weavers put in
- Srinagar’s largest carpet showroom, located on the banks of Dal Lake, is getting slashed gradually. In the lack of customers, the beautiful carpets just became the showcase once which used to be an attraction for middle-class customers
- Vicky Shaw, owner of Shaw Art Palace said, “Carpet or shawl is labour-intensive. 20 percent is a raw material and 80 percent of carpet cost is wages of labourers because it takes a long time to make a carpet. It means you are imposing a tax on labourers which is 80% the cost of a carpet. It’s unfair”
- Kashmir is the seller of carpet specific items and its carpet is renowned for the charismatic designing. Last year, 2016, the Kashmir had collected Rs.1,100 Crore from the export of the carpet alone
- Most of the carpet traders are complaining about the current situation in Kashmir as hundreds of weavers lost their job in lack of work and customers
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What FM Says About The GST Transition:
The Finance minister, Arun Jaitley recently mentioned the transition of GST as fairly smooth and criticized the opposition party for ill-informed attempts to shun the GST implementation. He favoured the GST schemes to move non-compliant taxpayers to become GST compliant.
Furthermore he said, “Many attempts have been made by political groups to derail the GST, but I am glad that their own state governments are not listening to them because they know 80% of the money is going to come to them so they don’t have to appease an ill-informed central leader of the party and let the revenues of their own state suffer.”
