GST handicaps Kashmir handicrafts

Srinagar- On a warm summer day, Ghulam Mohammad (name changed), a papier-mache dealer at Boulevard road, the most coveted tourist hub in Kashmir, is taking a siesta in his shop on a wooden bed as a song by legendary singer Mohammad Rafi from the movie Hum Dono plays out from a radio in a sombre tune:

Jo mil gaya usi ko muqaddar samajh liya– muqaddar samajh liya–

Jo kho gaya mein usko bhulata chala gaya.

Har fikar ko dhuein mein udata chala gaya.

As I entered his shop, he woke up and I introduced myself. I was yet to complete my sentence when he said, “Gobara (son), I am hopelessly waiting since morning in my shop for customers, but till now no one has turned up. It is evening now and there has not been one customer.” He was packing his bag to return home disappointed.

Mohammad’s case is not different from that of many other artisans in the Valley. The handicrafts sector, once a flourishing trade that would provide livelihood to thousands of people in Kashmir, is dying a silent death. In fact, according to Mohammad, it is all set to vanish from the Valley after the implementation of the Goods and Services Tax (GST) in the state.

The handicrafts industry occupies a vital position in the economic structure of Jammu and Kashmir. Half a million artisans across the state are engaged in the production of over fifty varieties of handicraft products for trade worth about Rs 2500 crores annually. The Kashmiri handicrafts industry comprises artistic work to produce rich and unique decorative goods completely by hand or by using hand tools.

Mohammad says after the devastating September 2014 floods and then the 2016 civilian unrest, the

imposition of new tax regime is surely going to paralyse the handicrafts sector which was once known as the backbone of the state’s economy. The sector, which provides livelihood to thousands of families in Kashmir, is now on the verge of extinction. It had already been facing multiple problems and now 18 per cent tax will be imposed on job works and 12 per cent of payment sales, leading to a slow death of the sector.

Like Mohammad, there are thousands of artisans who find it difficult to run their businesses and feed their families. The craft-making, which includes the making of namdas, gabbas, qalins, papier mache, embroidery, leather and wickerwork, metalware, jewellery and wood carving, requires both intelligence and leisure time available in the severe winter in Kashmir. The products have a good market in the country especially among foreign visitors.

However, many artisans have surrendered their business due to lesser returns.

Despite tall claims of the state government to promote the handicrafts sector, the decades-old Kashmiri’s indigenous trade segment has lost its sheen. “I got this skill from my father, but now my son is not taking up this profession. He prefers to work in other fields where he gets a handsome salary,” said a Nazir Ahmad, a shawl weaver from downtown Srinagar.

Weavers have produced exquisite shawls in Kashmir for centuries, but their craft risks dying out in the face of cheap imports and a young generation uninterested in mastering the skill. Since the 2014 floods there has been a slump in the handicrafts industry. Now levying the GST will result in less economic returns as the craft becomes costlier.

“GST implementation has hit our trade badly. Earlier we would send our handmade products to many states of India, selling and purchasing was very easy. Now, due to the new tax regime, we fail to export our products. The downturn has forced us to lay off 15 employs from our factory,” said Aafaq Ahmad Mir who owns Akthar Mir and Brothers Papier-mâché Company in Alamgari Bazar area of downtown Srinagar. Aafaq says he took over his father’s business after completing graduation and had over 25 employees working there but after imposition of GSTthey have not sold even a single product. Disappointed with the trade, he foresees a dark future of the industry and wants to wind-up his business and do something else to feed his family. Aafaq blames the J&K government, saying it has not taken any steps to save the centuries-old craft.

Kashmir’s noted industrialist Syed Shakeel Qalander says the handicrafts sector like many others is passing through tough times due to the dropping of demand in the national and international markets. “The artisans are changing the trade as the sector has lost its sustainability to provide livelihood during the past few years. The handicrafts production has also witnessed a negative growth of 2-3 per cent. The sector faces further persecution after tax exemptions and bringing handicraft items under GST net,” he said.

Whereas most of the handicraft items have been levied with 12 per cent rate of tax, some like wooden carved furniture or papier-mâché photo frames are levied 28 per cent rate. The handicraft items happen to be more labour-intensive and less capital intensive. For example, the raw material cost for a pashmina shawl comes under 5,000 against 50,000 (average) involved in its

labour on hand weaving and embroidery. Taxing the shawl will be tantamount to the taxing of hands which was hitherto consider to be sinful. Taxing of handicrafts was in practice during the autocratic rule in the state. In 1865, twenty-eight agitating shawl weavers who were protesting over an increase of tax rates were killed.

Shakeel says the artisans may not have to pay any tax if their annual turnover is within the exemption limit of 20 lakhs. However, they will not get the usual price from traders as these traders have to charge GST from customers apart from their profit margin which will make the product dearer in the already competitive markets.

The state government has failed in getting handicrafts exempted from GST as was promised by it several times. In a meeting with Kashmir Chamber of Commerce and Industry on August 3, the State Finance Minister Haseeb Ahmed Drabu said, “I have already written to the GST Council and the Union Finance Ministry that the handicrafts sector should be placed in zero percent GST slab. But I will suggest keeping it in five per cent slab because the tax will come back as input tax credit which will not be the case if the tax is waived off completely.”

Calling for a revival of the handicrafts sector in the state, he said the tax immunity enjoyed by the industry in the previous indirect taxation system in Jammu and Kashmir

will continue under the GST regime. However, this has not happened so far.

Drabu recently also said that the J&K government will take up the issue of bringing down GST rate on carpets from existing 12 per cent to 5 per cent in the next GSTCouncil meeting. This was after a delegation of carpet traders and manufacturers had called on the finance minister and made a representation for reduction of rate of tax on carpets which is presently at 12 per cent under the new tax regime.

In its twenty-first meeting, the GST Council exempted small handicraft traders with an annual turnover of less than 20 lakh from registration under the new tax regime while doing inter-state trade of handicraft products. Earlier such small traders had to register themselves for inter-state trade even when their turnover would fall under exemption threshold. This had become a huge issue in the state as thousands of small traders could not move to mainland India for door-to-door handicraft sales. However, the ambiguity in the decision remains as these traders have been asked to generate e-way bills for the goods carried to other states which necessarily makes them a part of the GST network.

Many artisans say while the new tax may benefit traders in a normal state, it would often be a headache for traders of J&K as everything from the filing of returns to tax payments is system generated. The whole system is dependent on a networking system which is still a distant reality in the state particularly in Kashmir and other backward areas.

“The frequent internet shutdown in the Valley is another contention as most transactions these days happen online and we are often not able to do it due to internet blockade,” said Sheikh Aashiq, former president of Kashmir Chamber of Commerce and Industry, an apex trade body.

Ishtiyaq Drab , Managing Director of Jammu and Kashmir Handicrafts Sales and Exports Corporation (JKHSEC), a government department that sells artisans’ products, said the sector has suffered losses amounting to six crore in the unrest-hit last fiscal. “The government is in no mood to revive the sector. We have already suffered a big loss due to 2016 uprising now the GST implementation has got mostly sales of our government arts emporiums down by almost 25 per cent. In July soon after implementation of GST we saw a decline in sales at all our showrooms,” Ishtiyaq said.

Source: Tehelka

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