It will dampen demand, hit farmers

Published Date: January 1, 2022




CHENNAI The Tamil Nadu government on Friday opposed the proposed increase in the Goods and Services Tax on some textile goods from 5% to 12%. It argued that the increase in the rate on fabrics, including handloom goods made from natural fibres, would dampen the demand, thus affecting farmers and small and medium enterprises.

The GST Council later decided to put the decision on hold.  

At a special sitting of the Council in New Delhi with the sole agenda of discussing the increase, Tamil Nadu Finance Minister Palanivel Thiaga Rajan said, "Alternatively, ready-made garments, having a sale value of above 0,000 or could be taxed at 12% and the present rate of 5% on goods below this level could be retained." 


Human-made fibres were made through automated  processes involving IOW labour and high capital. But the manufacture of goods from natural fibres was more labour, intensive and would have an impact on farmers. This sector was also run with a lower capital, mostly by micro, small and medium enterprises. "The proposed hike could not have come at a more inopportune time when the industry is limping back to normalcy from the onslaught of the COVID-19 pandemic," he said.


Tamil Nadu is one of the major States making handloom, power loom and hosiery  goods, and this sector is next only to the agriculture in job creation, he said. Before the GST was introduced, textiles were given full exemption under Tamil Nadu's VAT regime and readymade garments were taxed at 5%, he recalled The textile industry in the State was a forerunner in job creation.


"The handloom sector, which is barely surviving on the subsidies granted by the State government, will not be able to absorb the blow from the increase in the GST" he said.

In their representations, the associations representing this trade had highlighted that the GST Increase would cause a large-scale unemployment in the weaving industry because of the non-availability of additional loans and working capital, he said,


Mr. Rajan also reiterated that the current method of sharing of powers of direct taxation and indirect taxation was unfair as the direct taxation powers of the States had been limited. The situation was exacerbated by the curtailment of even the bulk of indirect taxation powers after the GST was introduced.


Media: The Hindu