Principal Chief Advisor to West Bengal Chief Minister Mamata Banerjee and the State’s former Finance Minister Amit Mitra on Friday described the Centre’s decision to increase GST in the textile sector as “very dangerous”. He said that the decision would result in the closure of about one lakh textile units and result in 15 lakh job losses in the textile and ancillary sectors. A decision to increase the GST on textile products from 5% to 12% was taken at the 45th meeting of the GST Council held on September 17. The new rates will come into effect from January 1, 2022.
Mr. Mitra, who was West Bengal’s Finance Minister for almost a decade, urged Union Finance Minister Nirmala Sitharaman to call an urgent meeting of the GST Council and reverse the decision.
Describing the textile sector in the country as a “vulnerable sector” which operates on very thin margins of profit, Mr. Mitra explained that a number of negative factors due to the GST hike would hurt the value chain of the entire textile sector. Rolling out statistics, the economist pointed out that the sector is estimated to the tune of ₹5.4 lakh crore and sector employs about 3.9 crore people, excluding farmers associated with growing cotton and jute. He said the figures he was citing were based on discussions with industry experts and a consulting firm.
Mr. Mitra pointed out that the increase in GST will not only cause closure of units and job losses but will force out many units from the formal economy, of which they had become a part by falling under the GST net. “The evasion will be more because they can’t afford to pay 12% GST,” he added.
Mr. Mitra also said that if the textile sector is affected in the country, it will trigger imports.
Pointing out that Centre’s argument for increasing the GST is to correct an inverted duty structure, Mr. Mitra said that only 15% of the textile industry suffers from the anomaly. The economist said that the Centre proposes to raise ₹7,000 crore but it’s a questionable decision considering the impact it will have on the sector.
Representatives from the textile industry have also raised concerns over the increase in GST rates. K.B. Agarwala, president of the Federation of Hosiery Manufacturers Association of India said that the hosiery and knitwear, including garments, industry in India employs close to 11 million workers, of which eight million are engaged in the domestic sector and three million in the export sector.
“Even if there is an estimated 18% shrinkage in the workforce, the job loss will be around 1.44 million. An increase in ‘taxes’ by as much as 7% will lead to a much higher level of job losses — possibly in excess of two million,” Mr. Agarwala said.
