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Cloth merchants plan to go on a three-day nationwide strike beginning June 27 in protest of 5 per cent GST (Goods and Services Tax) levied on the services (job work) rendered by them for the textile industry.
Thousands of cloth merchants across Ahmedabad, Surat and Jaipur have decided to shut shop between June 27 and 29, in a mpve likely to bring the entire textile value chain to a grinding halt. The protest is also expected to envelop Mumbai, Kolkata and other major cloth manufacturing and trading centres. Wholesalers, traders, angadiyas, transporters, courier companies exclusively working for cloth deliveries etc are also expected to join the protest.
These cloth merchants are demanding a one-year exemption from GST, in addition to proper training about tax levies and a help desk number with adequate guidance about the levy.
"Apart from yarn manufacturers, no one else had been paying taxes so far in the history of the textile industry in India, as 75 per cent of the business is in cash and the remaining in cheque and other modes of payment. Most importantly, the downstream textile value chain has been working on long-period credit, based on mutual trust and consent, for several decades without government intervention. These businesses get out-of-the-book finance from within the industry which is discouraged by banks. Therefore, being an integral part of the textile industry, wholesalers, traders, angadiyas, transporters, courier companies etc need to be protected with at least a year of GST exemption," said Gaurang Ramprasad Bhagat, president, Maskati Cloth Market Association, an Ahmedabad-based representative body of cloth merchants across the country.
Bhagat said the strike would have a cascading but gradual impact on the entire textile industry, as merchants play a pivotal role in transforming cotton to yarn, fabric and clothes. He estimates the textile industry's losses will run into crores of rupees during the three-day strike, which could be extended if the government doesn't withdraw GST on cloth merchants.
Nost textile players in the value chain don't have adequate facilities to track movement of goods and hence claim input credit. Under GST, they fear they will have to forego input credit and lose all the claims they legally deserve.
Meanwhile, organised players have decided not to support the cloth merchants in this endeavour for their own benefit. They would be able to claim input credit even if the downstream players do not claim it.
"We want GST to be implemented and hence we don't support the protest called by the cloth merchants," said Rahul Mehta, president, Clothing Manufacturers Association of India (CMAI).
CMAI has developed a software in association with Tata Consultancy Services (TCS) to help clothing manufacturers and merchants identity various lacunae and address a number of issues for smooth GST payment. Meanwhile the government is planning to issue unique a GST number for textile players on June 25.
The cloth merchants would take a final call next month on whether to intensity the protest or support GST.