For the textile industry, the year 2017 was challenging as it faced headwinds in the form of Goods and Services Tax (GST) leading to disruptions in production
“We started the year getting out of demonetisation,” said S.K. Jain, chairman, Confederation of Indian Textile Industry (CITI).
“During November and December last year, production activities were down (on demonetisation). In January, it picked up. However, in April, concerns related to GST set in and no one wanted to hold stocks. Till September, demand was sluggish. From October, the market has picked up,” he said.
While retailers and manufacturers reduced inventory with special discount sales before the new indirect tax regime took effect, industries along the textile value chain saw GST-related disruptions in production.
For an industry that is highly fragmented, runs on cash economy and where products are for mass consumption, the tax regime put a spanner in the works.
According to industry sources, textile production was affected by about 3% to 4 % this year on account of GST. Though exports are showing growth issues with GST remain.
“China is reporting positive activity and demand is picking up in the U.S. and the European Union,” said Siddhartha Rajagopal, executive director, Cotton Textiles Export Promotion Council.
“These are expected to augur well for Indian textile and clothing exporters next year. While there might be a small growth in exports this year (2017), there are problems in refunds for GST as even the July refunds are yet to come. The government should clear the backlog.“
Industry sources say that as more textile units get into the formal tax system, the prices of textile products might go up in the coming months. But, the impact would not be much for consumers. What is of concern to the industry is imports going up after GST.
Post-GST, import of many textile items have increased, affecting the domestic industry and exports have become less competitive. The Centre has to restore the pre-GST import duty and export incentives. It should also focus on Free Trade Agreements, Mr. Jain says.
Dust lifts off the ground as 50-year-old Yaseen Ansari walks into his textile manufacturing unit for the first time in two months. Inside, 20-odd powerlooms sit silently, covered in dust and cobwebs. The family-owned textile manufacturing facility, located on a narrow alley of Narpoli in Bhiwandi, has not been operational for almost a year.
A kilometre away, a handful of powerlooms weave ‘fancy’ fabric — white fabric with intricate borders of red and blue – at Iqbal Burhanpuri’s textile unit in Khadipar. A large part of the unit is not operational. He had once sold the fabric for Rs 37 a meter, he said, but is now unable to find traders willing to buy it for Rs 25.
“Bhiwandi’s textile industry has become a casualty of volatile government policies that keep changing every few months. First there was demonetisation, then there was the new tax,” said Ansari, adding that the year 2017 was catastrophic for the state’s textile industry.
Almost a year ago, the alleys in Bhiwandi — one of India’s largest textile hubs, located 20 km northeast of Mumbai — were abuzz with the constant whirring of powerlooms. Today, they wear a somewhat deserted look as many units remain shut. Those that are operational, are only partly so.
The textile industry, which is heavily dependent on cash transactions, had been crippled by the move to ban old Rs 500 and Rs 1,000 notes, announced by the Prime Minister on November 8, 2016. As weavers were still reeling under the impact of demonetisation, the government’s introduction of the Goods and Services Tax (GST) did little to ease the situation.
Five months on, business has picked up only slightly. “Some of the master weavers have been able to mobilise capital and resumed operations. I have been able to start 200 looms,” said Rashid Tahir Momin, former MLA from Bhiwandi, whose family owns around 500 looms.
However, not many weavers are hopeful. The year-long slowdown has wiped out capital, pushed weavers into a debt cycle and created a shortage of labour. While many, including Ansari, have not been able to resume operations, some have even had to mortgage their looms. Now, they work as contractors for other master weavers.
As Tamil Nadu gets ready to celebrate the New Year, a small community of Nigerians in the textile town of Tirupur has little to cheer about. The police have told the community to ensure its members are not involved in the garment trade without work permits.
“The Nigerians who come to Tirupur on tourist visas or student visas are not allowed to do business here,” said P Nagarajan, the Tirupur commissioner of police. “Only those who have an employment visa can do business. We told the Nigerian Welfare Association that we want them to abide by the rules, or we will take action.”
The police’s warning prompted the Tirupur Nigeria Community Welfare and Garment Traders Association to put up a notice in Khaderpettai garment market, banning Nigerians from conducting business from January 1. “All Nigerians who [are] presently into partnership businesses with Indians must not continue the operation inside Khaderpettai market,” read the notice, signed by the association’s chairman Philip Nicolas. “Anyone who wish[es] to start a new business individually or in partnership with any Indian must submit copies of business documents to respective police authority and the Nigerian Association.”
The notice warned of “serious action” for disobeying the rules, which are meant to assuage the “continuous and increased agitation” of local people at Khaderpettai. “This is issued for the interest of peace and respect to our host country and our Tamil Nadu neighbours,” the notice stated. “We will continue to make every effort to keep the good relationship between Nigeria and India.”
NEW DELHI: 2018 may turn out to be a challenging year for India's textile and garment industry, with exporters still reeling under the impact of GST and outward shipments likely to miss the USD 45 billion target for 2017-18.
Garment exporters have been demanding that the duty reimbursement to them be retained at the pre-GST (Goods and Services Tax) drawback rate of 7.5 per cent, amid declining outbound shipments.
India's apparel exports declined 39 per cent in value terms in October.
However, India's cotton production could touch 37.7 million bales in the year that began on October 1, up from 34.5 million bales produced in 2016/17.
The production of import substitute bivoltine silk in the country is expected to reach around 6,200 million tonnes (MT) in 2017-18 as compared to 5,266 MT a year ago, registering an increase of 19 per cent, according to the Textile Ministry.
Meanwhile, 2017 turned out to be a mixed bag for the textiles sector. While initiatives were unveiled for power loom units and weavers, the much-awaited new National Textiles Policy is yet to see the light of the day.
Towards the end of the year, a Scheme for Capacity Building in Textile Sector to boost skill development and job creation was launched with an outlay of Rs 1,300 crore. 10 lakh people are expected to be skilled and certified in various segments of Textile Sector through the scheme, out of which 1 lakh will be in traditional sectors.
The year also witnessed the first mega international trade event for the textile sector, which was inaugurated by Prime Minister Narendra Modi in Gandhinagar, Gujarat, on 30 June.
BJP chief Amit Shah is likely to deliver his first speech in Parliament on GST bill, which was passed by the Lok Sabha last week.
A party leader said Shah would deliver his speech in the Upper House on the proposed legislation, which sought to replace an ordinance issued in September to give effect to certain decisions of the GST Council.
The bill may come up for a discussion in a day or two, the BJP leader, who did not wish to be named, said.
The GST was arguably one of the most discussed issues in the country in 2017. Natural gas and ATF can be brought under the purview of GST. According to the detailed information given to CNBC-Voice, this can be considered in the GST Council meeting on January 18.
NEW DELHI: With an aim to boost job creation and lift sagging exports, the textile ministry is expecting the finance ministry to clear Rs 170-crore special package for the knitwear sector at the earliest.
"The idea is to make the domestic manufacturers more competitive. This is an employment-intensive sector so any effort to boost investment will result in job creation," a top textile ministry official said.
The official said that the consultation between the textile and finance ministry is currently stuck on the issue of the monetary resources needed for the package, amounting to around Rs 170 crore.
He said the package will be announced as soon as the finance ministry gives its go-ahead, as no Cabinet approval was needed for the proposal entailing less than Rs 200 crore.
The move comes in the backdrop of the reforms announced by the government for generation of one crore jobs in the textile and apparel industry over next three years.
The textiles ministry had earlier rolled out similar plans for the apparel as well as the made-ups, which includes towels and decorative cotton products etc.
"We have given it to apparel and made-ups, knitwear is also a finished product, so its natural that a package for it is being finalised," said the official.
The knitwear industry, which mainly comprises small and medium enterprises, was left out in the earlier scheme of things. Exporters believe that the package can ease the pain especially after the goods and services tax rollout.
The move comes after firms - Lifestyle, Hardcastle Restaurants - south and western India's McDonald's franchisee and Hindustan Unilever - received a notice from the government that they were not complying with the anti-profiteering clause, which Moneycontrol reported last month.
The Business Standard report also mentions that Pyramid Infratech and Honda Motor Vehicles had also received a similar notice. The firms are required to provide their balance sheet, trial balance and profit and loss account for last one year.
The anti-profiteering clause points that the input tax credit benefits must compulsorily be passed on to the consumers.
The firms which are moving court on the clause have not received a notice, according to the report. "There is a lot of ambiguity in the anti-profiteering clause," an FMCG source told the paper. Sources said that they are unaware of how to compute the input tax credit under the new regime and that it will take close to two weeks to file the petition. In case, the government comes with proper guidelines for this clause, these firms will not file the petition.
Guidelines here refer to the methodology of how to determine the input tax credit. Its absence has been the cause of the increase in complaints by customers, according to experts. So far, there have been 169 such complaints.
Along with the firms, the Confederation of Indian Industry (CII) has also urged the government to formulate clear guidelines under the anti-profiteering clause. The compliance will require the government to compare the cost of every product before and after the GST.
Adding to this, the government will also be required to take note of the producers also or suppliers who deal with products which are not on the record, which lead to difficulties in determining the price margins for individual products.
For this, CII says that the tax authorities will be required to be sensitive and avoid harassing the businesses. It also points that the clause has given less time for preparation and adopting the new norms.
Tamil Nadu state must compensate the parents of a girl who was electrocuted to death in a textile mill where they worked as bonded labourers, India's human rights panel has ordered.
Thursday's order highlights the plight of millions of people working as virtual slaves to repay debts throughout India, including Tamil Nadu where the textile industry is concentrated, campaigners said.
"Many are trapped in bondage in spinning mills in the region," said Thangavel Maran of the charity Vizhuthugal (Roots), which took the case to the National Human Rights Commission (NHRC).
"Nobody knows them and it is only when an incident like this happens that the cases come out," he said. "It is the industry's dirty secret."
Employers often hold children to ensure that their parents return when they travel home for weddings or funerals.
Karunaiyammal and Balasubramani Bathran said they were forced to leave their six-year-old daughter, Nalini, at the factory while they went home for a day trip in 2014.
"We left early in the morning and by the time we came back in the evening, she had died," said Balasubramani.
"They said she had accidentally touched a live wire," he told the Thomson Reuters Foundation by phone. "No other explanation was given and no help was offered."
India banned bonded labour in 1976 but it remains widespread across brick kilns, rice mills and other industries.
Many bonded labourers are essentially enslaved, as they work to pay off heavy debts that are compounded by interest and shady accounting practices. Activists say they often end up paying 10 times the amount borrowed.
Employers commonly restrict the freedom of movement of bonded labourers, forcing them to live within the premises of their work site.
At the time of their child's death, the Bathrans had been working for nearly two years to pay off a loan of 60,000 Indian rupees ($942).
NEW DELHI: Come February and transporters will not need separate transit passes for moving goods from one state to another as the e-way bill issued to them will be valid throughout India, GST Network said today.
Under the Goods and Services Tax rolled out from July last year, inter-state movement of goods beyond 10 kms, with a value of Rs 50,000 and above, will mandatorily require e-way bill from February 1.
GSTN CEO Prakash Kumar said: "Taxpayers and transporters need not visit any tax office or check post as the e-way Bill can be generated electronically in a self-service mode.
"The new system enables generation of e-Way bill on the portal, through mobile App, through SMS and for large users using offline tool."
"The remaining states will join during next fortnight. The period up to January 31 will be used as trial period for all stakeholders," GSTN said in a statement.
It said transporters who want to generate e-way bill can visit the 'ewaybill.nic.in' portal and register themselves by giving the GSTIN. Transporters who are not registered under GST can enrol themselves under e-way bill system by providing their PAN or Aadhaar to generate the eWay Bill.
Alert messages are also issued to the users through online and SMS.
"Vehicle number can be entered by those who generate E- way Bill or transporter and they can also update the vehicle number in case of vehicle breakdown or transshipment," said GSTN, the company handling the technology backbone for GST roll out.