Will GST ring the death knell for the 'Makers' of India?

Advocacy groups say the GST on all handloom and handicraft below a certain price must be removed

Before Independence, when the British promoted the sale of their mill-made textiles, Indians rallied around the humble handloom weaver through the swadeshi movement.
 
Almost three months after the introduction of the goods and services tax (GST) regime in India, advocates of the country’s vibrant crafts sector believe that another national movement is required to save our craftsmen from oblivion.
 
“GST regulations don’t differentiate between handmade and machine-made products,” says Ritu Sethi of the Delhi-based craft advocacy non-profit organisation Craft Revival Trust. “By levying the same tax slabs on both categories, some punitively high, the government is making the handmade sector — already struggling to compete with machine-made products — further commercially unviable!”
 
The statistics bear her out. According to the 2009-10 Handloom Census, more than 4.3 million people were engaged in weaving and allied activities, down from 6.55 million in the previous Census in 1995-96. After the GST, as craftspeople report huge drops in sales, which they can ill-afford, craft sector advocates believe that more craftspeople will quit their traditional crafts and move to other occupations.
 
Let us consider the average profile of an Indian handloom artisan, the latest entrant to the GST’s ambit. According to a 2014 study by KPMG for the National Skill Development Corporation, 84 per cent of weavers live in villages. Many belong to scheduled castes and tribes and minority groups. The sub-sector largely comprises women workers, of whom 71 per cent are illiterate, with underdeveloped marketing skills and low standards of living.
 
“Now imagine — these are the people the government expects will file their GST online, three times a month!” comments Meeta Mastani, co-founder of Bindaas Collective, a social enterprise that sources directly from craftspeople. “All my vendors, even the ones who’re relatively educated, are struggling with this.” Krishna Kumar, her block printer in Kaladera (Jaipur), says: “Many printers in my craft cluster are thinking of closing their small-scale businesses and taking up jobwork instead. Others have already started selling to traders, who will take on their GST burden for a commission, instead of selling directly.”
 

In the government-recognised Kaladera craft cluster, there is poor internet connectivity and patchy electricity supply, let alone infrastructure to aid artisans to file the GST. Consequently, they’re all more dependent than ever before on their chartered accountants 50 km away, to deal with the added burden of paperwork. “The government has ignored the difference between small producers selling their own products, very often illiterate or neo-literate (often practising craft as an alternative occupation along with agriculture), and the big chains, who produce in bulk, and have big margins that can buffer increases in prices,” says Laila Tyabji of Dastkar.
 
Others, like Nitin K Pamnani, founder of online crafts portal iTokri, partly attribute the post-GST drop in sales (an estimated 15-20 per cent) to the punishing tax levied on several handicrafts. Dhokra metalwork, the 4,000-year-old wax-casting technique practised by tribals of West Bengal, Odisha, and Jharkhand, is a case in point. Earlier, as a handicraft, Dhokra artifacts attracted no tax. Under the GST, however, it’s being taxed at 12 per cent. Upcycled handmade cotton bags, earlier not taxed, are now being taxed at 18 per cent, with manufacturers scrambling to figure out how to pay tax on their raw material (waste fabric is often donated to them). “I believe that any tax above 18 per cent is a punitive tax meant for alcohol or tobacco,” says Sethi. “Why levy it on handicrafts that are produced sustainably, using recycled or locally available raw materials?”
 
Sethi and others from the crafts sector are especially critical of the minutiae that the GST has delved into, and have caused great confusion among artisans. For example, terracotta roofing tiles used in rural homes are taxed at five per cent, while earthen pots and lamps are not. Terracotta products such as tableware, bells, and toys are being taxed at 18 per cent, while the latest September 9 GST amendment has removed the tax on religious idols made from terracotta!
 

Ensuring the future of Indian handicrafts in this entirely new tax climate could require several changes. “We’ve suggested an All-India registration drive of artisan-producers and reviving the Artisan Card Scheme,” says Tyabji. The idea is to distinguish between small-scale craft products and big-ticket items such as Jamawar shawls and hand-knotted carpets while determining tax slabs for them. “The main thing is to differentiate between the small artisan-producer selling his own products and a retailer selling craft items in a five-star hotel boutique!” she says. Pamnani, who works directly with artisans, has been observing with dismay his vendors struggling with the added paperwork. He believes that ideally, the government should not levy any tax on craft. If it does, then the process of filing should be simplified. “Filing the GST three times a month is proving highly impractical, and even more so for illiterate artisans in far-flung rural areas,” he advocates. “Perhaps it would be a better idea for the government to ask for the filing of the GST once in three months instead of three times a month!”
 
Sethi and Mastani believe that the GST on all handloom and handicraft below a certain price must be removed altogether. “Instead of levying taxes on the craft sector, the government needs to make it competitive and ensure its future!” he said. The country’s rich and diverse tradition of craft should be acknowledged as an integral part of the government’s much-vaunted Make in India campaign. More importantly, Indian handloom and handicraft are much more than simply the livelihoods of those who practise them. “They represent India’s unique aesthetic and the wonderful creative combination of hand, eye and mind,” says Tyabji. “This makes them essential to our cultural survival.”

---

Series concludes