Bhiwandi’s powerloom industry still bears the brunt of GST
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
A year since the GST, the powerloom industry in Bhiwandi is still crawling back to life.
“These days when I think of the looms, I am scared. Just don’t know till what time I can keep running this business,” said Raju, a job worker, who gets powerloom projects on contract from large fabric manufacturers.
In the last one year, his turnover have shrunk by more than half to less than 2.5 lakh per month from 6 lakh a month earlier.
Raju was one of the thousands of small loom owners and operators in Maharashtra’s Bhiwandi, who were out of the tax bracket till Goods and Service Tax (GST) brought fabric under its net.
Increased compliance and paperwork meant a transformation for what has been, largely, an unorganised sector.
This caused quite a shock and for a lot of players like Raju, business unravelled.
A year since, the powerloom industry in Bhiwandi is still crawling back to life.
“Since the last one year, we’re running only on bank loans. Generating working capital has been a big issue,” said Krishna Bairi, Raju’s associate.
Late last year, government incentives to reduce tax on inputs and bring down compliance requirements provided a bit of a breather.
The partial rollback of reverse charge mechanism, where the liability to pay tax was on the recipient of supply of goods or services instead of the supplier of such goods, was a relief.
This helped small loom operators in Bhiwandi to move from being on the brink of collapse a year ago, to just about surviving.
Even after a year, loom operators say the demand for Bhiwandi’s fabrics has not picked up and rates have fallen.
“The big parties aren’t able to sell their goods and they are in turn stopping our payments for about two-three months. Besides that, the labour charges have also fallen from Rs six per metre to Rs five. We are facing loss there also,” Bairi said.
While the industry is slowly learning taxation compliances, multiple changes in rules have kept the newbies on their toes.
Issues like lack of capital and subdued demand notwithstanding, the additional burden of filing intra-state e-way bills is adding to their woes.
Last month, Maharashtra implemented intra-state e-way bills even for local transport, if the value of goods transported exceeds Rs 50,000.
This was meant to benefit small businesses that operate on intra-state basis and the less than truckload (LTL) operators, but transport operators in Bhiwandi say it doesn’t.
“More often, the value of the goods we carry is more than Rs 50,000. The goods are sent to multiple sites for production, packaging etc. and to make e-way bills at all sites is too much work. We’re not able to do it,” operators said.
Many small truck owners transport goods for multiple clients at once and here they claim generating and collecting e-way bills is leading to loss in working hours.
“Everybody doesn’t know how to make the e-way bill. We’re transporters, we don’t own laptops or computers. We have to go to each owner to get bills and prints, and manage timings,” said RamChoudhary, a small truck owner.
The transporters are hoping for some relaxations like in other states, either increase the value of goods transported or the kilometer criteria applicable for intra-state e-way bills.
“E-way bills required within the limit of 10 kms is wrong. Don’t know what the government is gaining, but for us the business has dropped by 60%, we are operating at just 40% now,” RamChoudhary said.
E-way bills have added another layer of compliance for loom owners.
Tirupati, another loom owner said, “Just for the e-way bill filing, I have to hire one person and my monthly expense has increased by Rs 10,000-15,000. But due to delays in transportation, because of this requirement, my business is affected.”
Coupled with subdued demand since last one year, Tirupati said his earnings have reduced by about Rs 30,000-35,000 per month from what it was a year ago.
Experts say Bhiwandi’s small operators are losing their cost competitiveness, especially with the balance of power shifting in the favour of large manufacturers, due to increased compliance.
Amit Chibber, Secretary, Rajasthan Grey Cloth Association, Bhiwandi said, “From unorganised and small players, the business is getting transferred to organised sector and larger manufacturers. This is because maintaining the accounting systems for a manufacturer who owns 1,000 looms and for those who have 50 looms is the same. This cost escalation is affecting the small and medium scale industry.”
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