SME preparedness: Fines may show way to GST in Panipat textile industry

Sarvesh Kadiyan, a small-time textile manufacturer in the dusty industrial complex of Panipat, had an animated conversation with a chartered accountant (CA) last week. Kadiyan was looking for clarity on the goods and services tax (GST) set to roll out on July 1. The CA told the businessman to “wait till someone penalises you for non-payment of GST”.
 
For a majority of the 1,500 odd manufacturing units in the area, finding the right guidance seems to be quite a task.
 
“It was funny; my CA told me he does not know much. According to him, as the roll-out begins on July 1, a lot many people who are equally unaware would start getting fined by taxation authorities for non-compliance,’’ Kadiyan said. Once penalties are imposed, one would get clarity on what is allowed or not allowed in the new tax regime, he added.
 
Panipat is the biggest centre for shoddy yarn in the world. Anything and everything related to textile is manufactured in this city, a base for the Rs 40,000-crore industry including exports.
 
But, the size and scale of the industry is not helping businesses when it comes to GST.  And, many of the small and large manufacturers have now decided to ‘go with the flow’. In fact, some found similarities to the situation when demonetisation was enforced in November 2016.
 
“During demonetisation, every day, we got to hear of new rules and we modified the business accordingly. From July 1, we would do the same. The way the rules come out and the way the tax officials, CA and lawyers tell us to function, we will work accordingly,” said Bhim Rana, president, Panipat Dyers Association. 

FAST FACTS: Panipat textile sector

• Manufacturing units: 1,500 plus
• Workers employed: 250,000
• Size: Rs 40,000 crore

Manufacturing base for:  Textile, carpets, blankets, home furnishing 

Limited education among the manufacturers and lack of awareness campaigns are mostly responsible for the current state of affairs. “While they are good at what they do, their knowledge of online billing and intricacies of GST rules is not sufficient. What is needed is concentrated campaigns on GST to educate them, but time is now running out,” said Chetan Sharma, a young entrepreneur who did his MBA from Pune and now runs a successful packaging business.
 
The worry is that many small manufacturers would now have to invest in quality CAs and accountants, pushing their costs up.
 
“CAs are asking anywhere between Rs 15,000 and a lakh. I used to do my own taxes, now I will have to employ an accountant who knows computers, as I do not know how to file taxes online,” said Satender Singh, a thread manufacturing unit owner.
 
In the last one month, business has taken a hit as well, as orders have slowed down and fears are that next month, things might just come to a standstill. “If last month business was down to 60 per cent, we believe next month it would be less than half. The preparations for GST should have started at least four months back, but at the last moment, it is all very chaotic,” according to Rana.
 
Industry chambers on their part are trying to hold awareness campaigns to help out maximum number of manufacturers and believe it is the unorganised sector that is facing problems.
 
“We have in the past one and a half months organised six awareness drives. While some such as the cotton industry are prepared as the input tax has not changed, other such as the looms industry are not ready as many do not even have the GST number,” said Pritam Singh Sachdeva, chairman, Haryana Chambers of Commerce and Industry, Panipat Chapter.