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The cascading impact of GST on Tirupur textile mills

"Tirupur textile industry has been reeling under tremendous pressure, as a result many suicide have been reported. The land which used to be a breeding ground for self-made entrepreneurs has its own share of challenges. Since past decade, the industry has been a victim of global economic recession, steep rise in yarn prices, closure of dyeing units and labour issues. S Govindappan, VP-South India Hosiery Manufacturers Association, highlighted aggressive international competition, business slowdown in the wake of demonetisation and GST have made survival a big question."

 

 

Export Trust

 

Tirupur textile industry has been reeling under tremendous pressure, as a result many suicide have been reported. The land which used to be a breeding ground for self-made entrepreneurs has its own share of challenges. Since past decade, the industry has been a victim of global economic recession, steep rise in yarn prices, closure of dyeing units and labour issues. S Govindappan, VP-South India Hosiery Manufacturers Association, highlighted aggressive international competition, business slowdown in the wake of demonetisation and GST have made survival a big question. To top it, competition from countries like Bangladesh and Vietnam has snatched global orders from Tirupur. Banks and private lenders have tightened their purse strings when it comes to helping small businessmen in crisis.

Tough times in Tirupur

The cascading impact of GST on Tirupur textile mills

 

T R Vijaya Kumar, general secretary, Tirupur Exporters’ Association, added that it started with rupee appreciation or US dollar/Euro depreciation , ahead of GST implementation. It was a time when the knitwear industry was already losing its international competitiveness. The Centre promised that GST would bring down prices of raw materials but it did not happen.

While bigger companies can at least sustain the crises, small players are the ones who are the worst hit. They were not prepared to take the blow of drastic reduction in incentives given to exporters and stringent GST norms. M P Muthurathinam, President, Tirupur Exporters and Manufacturers’ Association, says small units, especially those who availed huge loans for expansion are finding it hard. According to sources, the Centre has not cleared more than Rs1,900 crore dues including GST returns, duty drawback and RoSL. But the same government has failed to restrain to its tax collecting agencies or banks to be lenient with entrepreneurs on repayments, averred Vijayakumar.

R Annadurai, Managing Trustee, Tirupur Thozhil Pathukappu Kuzhu (foundation for protection of Tirupur industries) said the organisation has formed a new wing consisting of a psychiatrist, a retired general manager of a nationalised bank, and an advocate to counsel entrepreneurs and workers who show suicidal tendencies and help them solve their financial woes.

While companies send a consignment, they have to pay 100 per cent GST to the government. But the buyer may take up to five months to settle the entire amount. Till then the company must be able to bear the burden of unpaid dues. K S Babuji, Secretary, South Collar Shirts and Inner Wear Small Scale Manufacturers Association, elaborates this was the practice for several years. But now tax collection has become stringent. Though government says GST for textiles is only 5 per cent, there are hidden taxes and they pay up to 13 per cent tax, which becomes a unbearable for small and new players.

Ultimately, it’s time the government relaxed tax norms and offer incentives to help entrepreneurs tide over the crisis. And as Raja M Shanmugam, President of Tirupur Exporters’ Association (TEA), says the Centre is making macro-economic corrections like demonetisation and GST. But it has failed to realise the importance of micro hand-holding supports like providing right rate for duty drawback and other incentives.

 
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