Surat: GST causes textile market to struggle but diamond market unaffected

By

Isabelle Crossley

Published
Jul 2, 2018

A year on from the introduction of the GST, the Federation of Surat Textile Traders Association is reporting a host of struggles for its traders but the area’s diamond industry has been doing better.

Surat has approximately ten lakh textile industry workers and is one of the country’s major hubs but, according to a report by ET Bureau, the area has been struggling since the introduction of the Goods and Services Tax (GST) a year ago in July, 2017. Where Surat used to produce around four crore metres of fabric per day a year ago, it now produces only 2.5 crore metres. Moreover, the number of looms in the city has gone down over the past year from seven to six lakh. 65,000 textiles traders based in Surat have reported losses over the past year.

Although the government has not yet done an official survey on the situation, the Federation of Surat Textile Traders Association has stated that there has been a lower demand for textiles in the region since the introduction of the GST. The association also reported that traders are not getting refunds from duty inversion and that the GST ITC-4 form is confusing its traders. This paints an unhappy picture for Surat’s textile industry. As the Union Government’s rhetoric focuses on boosting India’s domestic industries, Surat’s textile workers feel forgotten.

However, Surat’s diamond industry appears to be doing much better than the textile industry with the new GST regulations and one reason for this could be that it was already more organised than the textile sector before the introduction of the GST. Polished diamonds were originally taxed at three percent under the GST but, following protests, this was reduced to 0.25 percent in January 2018.

Textiles are still being taxed at five percent as with the introduction of the GST and, under the previous Value Added Tax System it was only the yarn, and not the textiles, that was taxed. Workers are hoping that the government will reduce the tax rate to improve business but, so far, no promises have been made.