Sivakasi cluster in Tamil Nadu to protest against levy of a flat 28% GST |
29-06-2017 Sivakasi cluster in Tamil Nadu to protest against levy of a flat 28% GST CHENNAI: Tamil Nadu’s firecracker manufacturing cluster around Sivakasi in Virudhunagar district has threatened to stop manufacturing by June-end in protest against the levy of a flat 28 % goods and services tax on fireworks. The industry, particularly small manufacturers, fears the tax reform will decimate the business even as Indian firecracker makers face competition from Chinese manufacturers. The cluster, estimated to generate a total revenue of about Rs 2,000 crore, has 821 units, some of which are cottage factories operating out of small rooms. Till now, these manufacturers have been paying a value-added tax of 14.5% but enjoy exemption from central excise tax of 12.5%, as their annual turnover would typically be below Rs 1.5 crore. The GST flattens this tax structure and brings the tiny units on par with large brands like Standard Fireworks and others. This is expected to result in a 50% increase in price of the final product, enough to dampen sales in the future, fear manufacturers. They are also unhappy, they say, that there has been no response to representations made to Arjun Ram Meghwal, minister of state for finance, and Tamil Nadu chief minister Edappadi K Palaniswami as well as bureaucrats. "It is going to hurt us, but shutdowns have helped us in the past,” said K Mariappan, secretary of Tamil Nadu Fireworks and Amorces Manufacturers’ Association. Over the past three years, Sivakasi had shut down in protest against Chinese fireworks and also after a regulatory crackdown on licensed cracker traders — a fallout of a legal case against the fireworks industry citing environmental concerns. The Delhi-NCR region, after the fireworks ban by the Supreme Court last year, is no longer a market for the Sivakasi cluster, which adds to the problems faced by the industry. In a representation to Shaktikanta Das, revenue secretary, the industry has said the appropriate rate options would be 5% or 12% in order to survive the Chinese competition. The rationale that input tax credit could be used to offset the high GST imposition does not hold water, they say. During the financial years 2014-15 and 2015-16, Standard Fireworks was able to get tax credit on its inputs only to the extent of 3.93% and lesser, because the fireworks industry, by its nature, spends most on its labour and less on the chemicals required for manufacture at 30% of total input costs. "After deducting the ITC (input tax credit) of 4% from the proposed 28% GST, the effective rate of tax payable becomes 24% which is very exorbitant…” entrepreneurs said in the letter to the secretary . D Jayakumar, Tamil Nadu’s finance minister, had said in the state legislature on Tuesday that pressure on the GST network has been applied to articulate the need for special treatment for the fireworks sector. The industry has been lobbying extensively with commerce and industry minister Nirmala Sitharaman and shipping minister Pon Radhakrishnan and RSS ideologue S Gurumurthy. "We have tried our best with these leaders. Also, our voices are not finding resonance with other states as the fireworks industry is largely present only in Tamil Nadu,” said A Asaithambi, president of the fireworks association. KE Raghunathan, national president of All India Manufacturers’ Organisation, said: "The cracker industry will face an existential crisis as it will not be able to capture business and make profits. They will only add earnings to the governments and the banks.” |