Multiple issues have been reported in the framework of GST, one of which comprises of the un-acknowledgement of handicrafts sector under the new tax regime, GST era. As reported, the Handcrafts sector is already facing challenges including from cheaper imports and machine-made products, the number of handloom weavers in the country has been in decline from 63 lakh in 1996 to 43 lakh in 2010, based on Census data.

A note prepared on behalf of the hand-made goods segment and shared with the Prime Minister’s Office draws attention to the fact that the word ‘hand’ (as in, for instance, hand-made or handicraft) is entirely missing from the GST list of items – except for a perfunctory reference to ‘handloom machinery’.

Issues with the GST have been seen on at least five fronts. Firstly, the multiple tax slabs for the similar items is leading to the confusion. For example, codes 9601 and 0507 refer to tortoise-shell – unworked or raw material; the former attracts 18 per cent tax, while the latter is taxed only at 5 per cent. How one can determine what category a product falls under is unclear.  Secondly, taxes are levied under the new regime on many low – priced items. Thirdly, sellers must register in multiple States as most of the buyers for products from the craft community operate on a pan-India basis. For example, they may be selling to online portals or those who conduct fairs in various States. Every supplier, howsoever small, is required to register under GST when making inter-State supply, which adds to the compliance burden for artisans. Fourthly, the industry being highly fragmented, it won’t be possible for small producers to register themselves.  As per the Export Promotion Council of Handcrafts, the industry has over seven million regional artisans among which many are unregistered and supplies the produce to large buyers. Post GST, now they shall have to register themselves forcibly or move out of the industry. At Fifth, while exporting products, under the GST framework the exporters must pay GST upfront, and then get a refund. The refund claiming process is tedious and may not be worthy to the efforts applied. As a result, this shall impact working capital requirements.

Also reported, under the earlier tax regime, in Delhi, VAT was 0 to 5% for handlooms and handicrafts, but now the tax range is from 3%to 18%.

Sources –The Hindu – Business Line

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