The proposal to fix a uniform GST slab of 12% for the garments sector, if it goes through, will hit the ‘already battered’ industry and may lead to job losses, industry insiders fear. Currently there are two tax slabs – 5% for bills below ₹999 and 12% for bills above that. Calls for a uniform tax slab prompted a proposal to fix it at 12% for both slabs. However, representatives of the garment sector are demanding that it should be 5%.
“The industry, one of the largest employers, is one of the worst-hit by the pandemic. With no social gatherings and people working from home, sales have dropped by over 50%. People also do not have spending capacity. Meanwhile, the prices of raw materials have shot up significantly. In such a situation, hiking tax to 12% will further hit the industry,” said Sajjan Raj Mehta, of Karnataka Hosiery and Garments’ Association.
In a letter to Chief Minister Basavaraj Bommai, who was recently appointed chairman of the Group of Ministers on GST Rate Rationalisation, Perikal M. Sundar, president of Federation of Karnataka Chamber of Commerce and Industry, (FKCCI), said, “This sector may face closure leading to unemployment and loss of revenue to the government.”
The proposal has garment workers worried too. A recent study by the Garment and Textiles Workers’ Union (GATWU) estimated that at least 60 garment factories shut down and nearly 40,000, mostly women, lost jobs, in Bengaluru alone since the pandemic.
The scale of the crisis is severe across the country, said Jayaram, advisor to GATWU. Even those working have had their salaries cut and in many cases not paid for months, he added. “The demand in the domestic market has fallen steeply and it is in this sector that there has been the most closures and job losses. In such a situation, hiking GST to 12% would lead to a further fall in demand and will eventually hit us workers. It will only mean more closures, loss of jobs and salary cuts. This is the time the government must stand by the sector,” Mr. Jayaram said.
Industry representatives recently met the CM and petitioned him seeking a uniform 5% GST slab for the sector. “Earlier, Mr. Bommai, acting on our petition, has written to Union Finance Minister Nirmala Sitharaman seeking a uniform slab of 5%. Now that he chairs the rate rationalisation committee himself, we hope he will honour his commitment,” said Mr. Mehta.