VAT-hit Panipat textile units face loss in business
Updated: Oct 15, 2013 06:27:56pm
Panipat, Oct 15 (KNN) The micro, small and medium-scale textile units in Panipat, the textile cluster of Haryana, are facing 50 per cent business loss and 25 per cent high cost of production due to imposition of Value Added Tax (VAT), according to associations here.
“The textile units in Panipat are facing almost 50 per cent of business loss both at the export market as well as the domestic market. When we go to the domestic market, there are no buyers for our products as our products have higher cost than Gujarat and Rajasthan due to 5 per cent VAT. Earlier, 12.5 per cent of tax was imposed suddenly without any prior notification and it was later reduced to 5 per cent. But why should we pay any tax at all” said President of Carpet Manufacturers Association, Jitender Malik.
About two months back 12.5 per cent VAT was imposed on textiles. However, the Haryana government reduced the VAT on textiles, including woollen and home textiles, from 12.5 per cent to 5 per cent, saying it would benefit textile traders to the tune of Rs 1.5 billion.
The industry associations in Panipat are now condemning the move and protesting against the imposition of 5 per cent VAT, especially as units making similar products in Gujarat and Rajasthan are exempted from such tax.
Expressing agitation over the growing cost of production, Malik said, “Panipat, which is a handloom city, is on a back foot due to government policies which are not good for the industry. Not only has the production cost gone up by at least 25 per cent, but the government also keeps increasing the electricity cost frequently even as labour costs have gone up.”
The labourers are migrating from Panipat to other places, especially the ones from Bihar, Odisha and West Bengal, owing to which there is acute labour shortage here. Anyway, there was scarcity of skilled labourers due to government schemes like MGNREGA, he added.
The small scale textile manufacturers who make rugs, cotton and woollen durries, druggets and carpets are directly affected by the tax imposition. However, other units like textile machinery manufactures, raw material suppliers, who are linked to them are also indirectly affected due to the slump in their sale.
We manufacture machineries for the small textile units here, since their sale has gone down by almost 50 per cent, we also do not have any takers for our machineries, said President of Textile Machinery Manufacturers Association, Sukhbir Singh Malik.
“There are several cottage and micro units here which recycle the threads and make rugs and durries. They are struggling a lot to survive as their cost of production has increased by 20-25 per cent. Moreover, raw material, power, transport and labour have become expensive. Many of the shops remain closed most of the time,” he added.
The recent rupee depreciation to all time low against dollar was a great opportunity for the exporters to get good price for their products.
But according to the Carpet Manufacturers Association here, “even rupee depreciation did not help the exporters here, as when the rupee depreciated, the buyers negotiated with us and fixed the price. Now, when the rupee value has improved, they have stuck to the price and not negotiating, so the exporters are still at a loss.”
Moreover, when exporters pay VAT, they can claim and get refund later from the government. But the process of claiming and refund is very lengthy and harassing. We even have to pay commission to claim refunds, it added.
The products on which VAT has been reduced include pillow covers sold with bed-sheets, comforters, duvet covers, cushion covers, bolster covers and ready to use curtains, as well as, bed covers, bed-spreads, towels, table cloths, curtains, napkins, shawls, saris and ladies suits on which any valued addition work like knitting, embroidery work has been done.
Panipat is known as city of handlooms employing more than 3 lakh people directly or indirectly. Panipat’s total handloom export market is estimated to be an Rs 3,000-crore industry. With as many as 350 exporters, the district has handloom units that are engaged in manufacturing products like durries, mats, table covers, bed sheets, curtains and carpets among other home furnishing items. (KNN/SD)
“The textile units in Panipat are facing almost 50 per cent of business loss both at the export market as well as the domestic market. When we go to the domestic market, there are no buyers for our products as our products have higher cost than Gujarat and Rajasthan due to 5 per cent VAT. Earlier, 12.5 per cent of tax was imposed suddenly without any prior notification and it was later reduced to 5 per cent. But why should we pay any tax at all” said President of Carpet Manufacturers Association, Jitender Malik.
About two months back 12.5 per cent VAT was imposed on textiles. However, the Haryana government reduced the VAT on textiles, including woollen and home textiles, from 12.5 per cent to 5 per cent, saying it would benefit textile traders to the tune of Rs 1.5 billion.
The industry associations in Panipat are now condemning the move and protesting against the imposition of 5 per cent VAT, especially as units making similar products in Gujarat and Rajasthan are exempted from such tax.
Expressing agitation over the growing cost of production, Malik said, “Panipat, which is a handloom city, is on a back foot due to government policies which are not good for the industry. Not only has the production cost gone up by at least 25 per cent, but the government also keeps increasing the electricity cost frequently even as labour costs have gone up.”
The labourers are migrating from Panipat to other places, especially the ones from Bihar, Odisha and West Bengal, owing to which there is acute labour shortage here. Anyway, there was scarcity of skilled labourers due to government schemes like MGNREGA, he added.
The small scale textile manufacturers who make rugs, cotton and woollen durries, druggets and carpets are directly affected by the tax imposition. However, other units like textile machinery manufactures, raw material suppliers, who are linked to them are also indirectly affected due to the slump in their sale.
We manufacture machineries for the small textile units here, since their sale has gone down by almost 50 per cent, we also do not have any takers for our machineries, said President of Textile Machinery Manufacturers Association, Sukhbir Singh Malik.
“There are several cottage and micro units here which recycle the threads and make rugs and durries. They are struggling a lot to survive as their cost of production has increased by 20-25 per cent. Moreover, raw material, power, transport and labour have become expensive. Many of the shops remain closed most of the time,” he added.
The recent rupee depreciation to all time low against dollar was a great opportunity for the exporters to get good price for their products.
But according to the Carpet Manufacturers Association here, “even rupee depreciation did not help the exporters here, as when the rupee depreciated, the buyers negotiated with us and fixed the price. Now, when the rupee value has improved, they have stuck to the price and not negotiating, so the exporters are still at a loss.”
Moreover, when exporters pay VAT, they can claim and get refund later from the government. But the process of claiming and refund is very lengthy and harassing. We even have to pay commission to claim refunds, it added.
The products on which VAT has been reduced include pillow covers sold with bed-sheets, comforters, duvet covers, cushion covers, bolster covers and ready to use curtains, as well as, bed covers, bed-spreads, towels, table cloths, curtains, napkins, shawls, saris and ladies suits on which any valued addition work like knitting, embroidery work has been done.
Panipat is known as city of handlooms employing more than 3 lakh people directly or indirectly. Panipat’s total handloom export market is estimated to be an Rs 3,000-crore industry. With as many as 350 exporters, the district has handloom units that are engaged in manufacturing products like durries, mats, table covers, bed sheets, curtains and carpets among other home furnishing items. (KNN/SD)
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