Silk to lose some of its sheen?

5% tax has been imposed on silk yarn and fabric

Karnataka : Bengaluru : 30/06/2017 : Picture to go with GST pacakage..... A labour working at Power Loom after participating in protest against GST. Silk Looms were stopped by half a day for participating in protest on 30 June 2017. Photo : Sreenivasa Murthy

The GST regime is set to end the tax-free run of the country’s indigenous silk industry with the introduction of 5% tax on silk yarn and fabric. However, tax exemptions will continue for cocoons, raw silk and silk waste, according to the Central Silk Board (CSB) officials.

President of the Karnataka Silk Weavers’ Federation, T.V. Maruthi, feared that the quantum of tax will be much more than 5%. “There is a chain of value addition like twisting, dyeing, processing, and embroidery before the final product comes out. So, the quantum of tax will work out to 9.5%,” he argued.

H. Rudranna Gowda, scientist, CSB, said weavers, who will have to bear the 5% tax on twisting, can recover the tax paid to the twister through input tax credit while selling their final product. The GST will also make it mandatory for a large number of twisters, who do job work for weavers, to register themselves if their annual turnover crosses ₹20 lakh.

Machine costs

GST has increased the quantum of tax on silk machinery from the existing 5.5% (VAT) to a whopping 18%, which makes simple equipment like silk reeling machines dearer.

This will hit reelers, concentrated in Ramanagaram district. Balakrishna Arya, who manufactures reeling machines, however, said GST also holds out a glimmer of hope with a substantial decrease in tax on engineering goods.

Mr. Maruthi claimed that even though cocoons are spared of taxes, the Domino Effect will hit sericulture farmers.