1. GST protests a sham; tax on fabrics a non issue; know the horror stories and more

GST protests a sham; tax on fabrics a non issue; know the horror stories and more

Before the government made the excise duty on fabric optional in 2003-04, the textile hub of Surat, where traders temporarily called off a two-week-long strike on Tuesday against the GST regime, was a deadly place for taxmen to venture into.

By: | New Delhi | Published: July 20, 2017 5:47 AM
GST, TAX, GST regime, Gujarat As the textile trader sends the product for dyeing and printing, he will pay processing charges, with a 5% GST.

Before the government made the excise duty on fabric optional in 2003-04, the textile hub of Surat — where traders temporarily called off a two-week-long strike on Tuesday against the goods and services tax (GST) regime — was a deadly place for taxmen to venture into. One horror story has it that an overzealous excise inspector once landed up at a textile unit there to enquire about the duty the proprietor was paying, narrates a textile industry veteran who has been a frequent visitor to Surat for business activities. “The hapless fellow was grabbed by four people and thrown into a boiler in no time for his audacity,” he told FE.

For decades, Surat has come to be known as a place for cheap saris, thanks to the opaque system where hardly any trader pays any indirect tax on fabric in accordance with the rule books. “It’s the fear of the formalisation of business where every transaction can be tracked for tax purposes under the GST regime that bothers these traders,” he said. Their demand for the removal of a 5% GST on fabric or at least an 18-month moratorium on GST for them is nothing but a sham, he added.

FE spoke to senior executives of half a dozen textile and garment companies who reiterated this view. It’s not just Surat, which accounts for roughly 40% of the country’s synthetic fibre output, such traders in other places like Indore and Bhiwandi (Maharashtra) are also tacitly supporting this agitation and closely watching the government’s moves, they added. They spoke on condition of anonymity as they all have business dealings with fabric traders in such cities. “If the government stands firm, this protest will fizzle out ultimately. But if it budges, it will encourage similar elements in other industries as well,” one of them said.

Currently, the duty incidence goes like this: There is an 18% GST on man-made fibre-filament/yarn, in place of the earlier VAT and excise duties. When the weaver sells the bale to the trader, the trader will have to pay 5% GST. As the textile trader sends the product for dyeing and printing, he will pay processing charges, with a 5% GST. After the cloth is dyed and returned to the trader, he sells it to the wholesaler with a 5% GST.

Thereafter, the wholesaler adds his own profit margin and sells to the retailer with a 5% GST.

The catch is that everybody in chain gets input tax credit against the taxes paid in the previous stage, so there is not really much of a burden on the trader as well due to the 5% GST on fabrics, as it is touted to be.

For its part, the government on Wednesday ruled out any change in tax rate unless there is an anomaly or the rates are unjustified. Central Board of Excise and Customs chairperson Vanaja Sarna said: “It (protest in Surat) is an issue that has snowballed but it is not something which cannot be settled… The issue is that textile sector is taxed for the first time. So anybody who comes into the net would feel the pinch.”

Speaking in the Rajya Sabha on Tuesday, finance minister Arun Jaitley said zero GST on fabrics “will break the input tax credit chain and then the garments/made-ups manufacturers will not be able to get the credit of tax on previous stages”. Also, zero GST on fabrics will result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes.

While the traders in Surat have called off the strike that is expected to have caused a potential loss of Rs 5,000 crore, they have warned of further stir if the government doesn’t come up with a solution in their favour in the next GST Council meeting on August 5. Although the city sells a lot of such cheap, unbranded stuff, it also boasts of some good brands, including Prafful, Parag and Rachna, as well. Nevertheless, the unorganised segment still accounts for the bulk of the business.

  1. Pradip Saha
    Jul 20, 2017 at 11:51 am
    8. The concept starts from the fact that ultimately all activities carried out by Individuals are transformed into Goods Services to be consumed by the Individuals only. So, is it simple enough or not? Whole detailed concept is available on request.
    Reply
    1. Pradip Saha
      Jul 20, 2017 at 11:50 am
      GST 6. Movement of goods services will be seamless throughout India as there will be no tax barriers and no question of producing or consuming states. All expenses of the Central, State Local bodies will be distributed from the collection of Transaction tax from the whole country. There will be substantial reduction of no. of employees in the Govt. will result in huge saving in public expenditure. 7. All commercial enterprises have to enter in a Govt. maintained centralised system day-to-day activities of the business and the data thus collected will be used for planning by Govt. private sector for efficiency. Please read on....
      Reply
      1. Pradip Saha
        Jul 20, 2017 at 11:48 am
        3. Only source of tax to the Government will be a Transaction Tax which will be levied only for Goods services sold to the final individual consumers. In any consumable goods services category, there will be only two slabs one lower one for mass consumption other one Luxury which will be much higher. 4. Goods will be only in 3 categories: ready consumable, ready consumable / intermediary and Intermediary. No tax for Intermediary use, Transaction tax only for ready consumables used by Individuals. 5. No Transaction tax for Capital goods used for production/business. Example: Commercial vehicles used for Goods/public transportation. Please read on....
        Reply
        1. Pradip Saha
          Jul 20, 2017 at 11:47 am
          GST Recent glorious sample is DEMONETIZATION. Even after 6 months of the hyped event nobody knows what the outcome of the whole exercise is except that BJP has swept the important state assembly elections. Now, my suggestions are briefly given below. 1. The Government will fully come out from all commercial activities including Railways, Healthcare Education. All present public sector / Govt establishments are to be privatized with Government holding 49 of ownership. 2. Income Tax for Individuals also companies to be totally abolished. So it will reduce conspicuous consumption all savings will go to Bank and used for development. Please read on....
          Reply
          1. Pradip Saha
            Jul 20, 2017 at 11:45 am
            The Government has produced after about 17 years of deliberation a GST system which is an absolute nuisance and nobody will know what is happening. It has replaced an already existing cumbersome system with another one equally complicated and it is not a "GOOD SIMPLE TAX" as being highlighted. The Government in its enthusiasm of doing some spectacular photo-finish reforms has totally forgotten the simple logic that if any system is simple it will work the chances of failure will be more if it is complicated. Like any other thing, Indian psyche is to copy not to innovate. I present below a simple system which will be a real path-breaking reform and will benefit everybody except the vested interests i.e the political class bureaucracy who wants to have a complicated system so that nobody can understand what is happening and keep everybody confused, so that they can milk the masses all the way to the bank. Please read on.....
            Reply
            1. Pradip Saha
              Jul 20, 2017 at 11:44 am
              GST And regarding Income Tax Dept, the amount collected by Govt. from Individuals Companies do not add up to the cost of maintaining the Dept. Their sole purpose is to finger ried class people who oppose the vested interests in positions of power. The tax evaders grease off the palms of decision makers regularly and keep the chain of black money going. Please read on
              Reply
              1. Pradip Saha
                Jul 20, 2017 at 11:42 am
                GST - not a Good Simple Tax Some call it The Good, The Sad The Terrible. Please read on: The whole GST is a half-baked concept. If you are media savvy, you will know that most of the taxes what we pay goes towards paying the huge battalion of Government servants in Centre, States Local bodies and in all sorts of places whose output is to harass the citizens. The pathetic condition of the Government Depts can be understood only when you visit them. Normally, you cannot get access to any Dept. without facing some touts or glorified consultants. Go to Motor Vehicles Dept of any state and try to get anything done. Unless you pass through these channels you will have a tough time to get anything done. Please read on .........
                Reply
                1. Load More Comments

                Go to Top