Nearly 2,000 working units of the knitwear/readymade garment cluster in Tirupur, employing more than a lakh people, have called for a day’s strike on Friday to protest against the GST Council’s decision to place them under the 18% slab.
Among various jobs at Tirupur, knitting, dyeing and compacting attract only 5% of GST, while other work such as printing, embroidery, button fixing, checking, ironing and packing are attracting 18%. Even finished garments will attract only 5% of GST and there is no logic in bringing these small and tiny job working units under 18%, said PS Rajendran, president of New Thiruppur Hosiery Garments, Small Manufacturers Association.
“We have called for a day’s strike on Friday to protest against the GST Council decision to put the above mentioned jobs under 18% of GST, which is uncalled for and unprecendented,” Rajendran pointed out.
Since the cluster is functioning under 90 days credit format (in the value chain), such a high GST will put the sector under financial stress, which will render people jobless going forward, he said.
A senior official at Tirupur Exporters’ Association (TEA) told FE: “Levying 18% on our work will disturb the seamless credit flow defeating the very objective behind GST.” The official further said that due to the global economic situation, many foreign buyers have started operating on credit basis where payments for exported goods are realised from 90-150 days from the date of shipment. This credit period is generally passed to every segment of the value chain whereby job workers are paid with credit terms of around 90 days.
“In this scenario, the situation where small and tiny job workers have to shell out 18% immediately at the end of the month despite their payments being realised much later, will create a huge working capital blockade causing financial stress to these micro and small industries,” he added.
According to TS Srikant, president of Tirupur Export Knit Printers Association, all micro units are running with capital investments of Rs 50,000 to Rs 50 lakh a month and on a 90-day credit format. “The imposition of 18% GST has created a huge burden and may lead us to shut shops,” he said.