GST dents Diwali biz of Surat textile units, sales 15-20% of typical season

The impact of GST has led to orders drying up this year, especially from north and central India wholesalers this season

The latest revision in Goods and Services Tax (GST) rates that were announced on October 6 may have come a tad late, with the Surat textile market sitting on a huge inventory, say traders.

While the market may have gone on vacation, the peak Diwali season dispatch was only 15-20 per cent of normal.

As against a typical Rs 10,000-12,000 crore worth of business during Diwali through dispatch of 1,500 trucks daily for a fortnight, the same has been down to mere 15-20 per cent, say traders who will take a call on a strike on October 25 once they resume work after the festival.

"This is the first time we are seeing such a Diwali this year. In the last fortnight or so, which sees peak of Diwali dispatches, business has been merely 15-20 per cent of a typical season," Tarachand Kasat of the Surat-based GST Sangharsh Samiti and a leading textile trader told Business Standard.

In the last few years, Surat has been dispatching textile goods through 1,500 trucks daily for a fortnight worth Rs 60 lakh each. However, the impact of GST has led to orders drying up this year, bringing down the daily dispatches substantially.

According to local textile traders, not only have orders dried up during Diwali, especially from North and Central India wholesalers, but also resulted in an inventory worth hundreds of crores of rupees lying in Surat. "Surat could be sitting on an inventory of at least Rs 500-800 crore which is unusual," said a leading trader on condition of anonymity.

As a result, around 150 wholesale textile markets stayed away from celebrating Diwali festival by decking up their offices. "The otherwise lit up textile markets during Diwali are gloomy this year. Traders have deliberately shunned lighting up their offices across 150 of the total 250 textile markets," Kasat added.

The powerloom industry which has shut shop for Diwali vacation is unsure how many units could resume production post festival. "Many weavers are yet to decide whether to resume production or not. We may see an extended vacation in powerloom industry this Diwali," said Nikhil Godiwala, a powerloom owner in Surat.

As for traders, Kasat said that while the community intends to resume work from October 25, it will decide on whether to call for a strike depending on the business scenario.

"The October 6 revision in GST for textiles has not fully addressed the issue in Surat synthetic textile market. With only 15-20 per cent business this Diwali, this is one of the worst festive seasons that one has seen. We will decide on whether to call for a strike or not once the market resumes," Kasat said.

There are 650,000 powerlooms, 150-200 wholesale textile markets, 20,000 manufacturers including 10,000 weavers, 75,000 traders, 450 processing units, and 50,000-60,000 embroidery machines in the Rs 50,000 crore synthetic textile hub of Surat. However, this year the synthetic fabric production in Surat had fallen from 40 million metres per day to 20-25 million metres per day in the first three months of GST rollout.