Big worries on small scale: Artisans jump through GST hoops for relevance

Advocates of the country’s vibrant craft sector believe that another national movement is required to save the craftsmen from oblivion. In a two-part series, Business Standard looks at the future of India’s small-scale industry in this entirely new tax climate

In a small village in Andhra Pradesh, leather puppet maker Kuliappa struggles with his accounts. In the last two months, he has sold goods worth a mere Rs 50,000. The confusion over the goods and services tax (GST) and its attendant procedures, tax slabs and payments has caused his orders to dry up. Also, his handmade, hand-painted leather products fall in the GST slab of 18 per cent. “This will increase the price of my products,” he says. 

“As such, I haven’t been able to compete with machine-made products on finish and price — now with the added tax burden, my business has become unviable.” Although his annual turnover is well below Rs 20 lakh, he has still taken a GST registration. Without this, the courier refuses to move his orders. 

In another corner of the country, Bhurabhai and other block printers in village Dhamadka, Kutch, have not sold a single thing for the last two months. The textile market there has virtually been at a standstill. “No one has filed any GST in my village,” he says. “We’ve had hardly any income for two months, so there’s no tax to pay.”

The GST has been touted as the most forward-looking tax reform India has ever seen — but two-and-a-half months into its implementation, it is threatening the livelihoods of Kuliappas and Bhurabhais across the country. The government offered some relief on September 9 when it exempted those artisans with an annual turnover of under Rs 20 lakh from the GST. However, this has been rendered relatively meaningless, not just because of the many hoops through which craftsmen are required to jump to prove their income is indeed below Rs 20 lakh, but also because buyers are unwilling to take on the extra paperwork, or pay the GST on behalf of their vendors. 

“Since most of my vendors are small-scale craftspeople without GST numbers, I have been filing the GST on all the purchases I make from them,” says Nitin Pamnani of iTokri, an online craft portal based in Madhya Pradesh which sources exclusively from artisans. “It’s extra paperwork, but sourcing directly from craftspeople is our USP and I’m passionate about their cause —however, few other buyers want to take on the accounting and financial nightmare of doing this, when they can simply deal with a bigger vendor with a GST registration!” 

Indeed, artisans aver that most craft buyers, including the government-run Crafts Museum, Jaypore and the Kamala Shop are refusing to deal with unregistered artisans. 

In Seelampur, Delhi, wooden bead maker Mansoor Khan wonders how he’s going to make ends meet. “I used to supply to Crafts Museum and other big buyers,” Khan says. “Now they only want to deal with artisans with GST registrations.” Consequently, he expects his turnover this year to be under Rs 3 lakh, lower than his previous year’s income. He doesn’t have a GST registration, and being illiterate, has no idea how to go about getting it. Khan isn’t alone in feeling at sea about the GST. 

In a recent representation from eminent craftspeople across the country on the issue of the GST on the craft sector, Dastkari Haat Samiti carried out a quick telephonic poll with 100 craftspeople across the country. Here are some of their findings: 75 per cent of the polled artisans did not know the exact amount of tax applicable on their craft, 89 per cent did not know that they would get reverse input refund on tax paid for raw materials.

Two basic issues of GST-related confusion among craftspeople pertain to costing and selling. Since the bulk of artisans in the country are illiterate (and used to traditional systems of accounting), they are finding it nearly impossible to tabulate their purchase of raw material from different sources at different rates, apply for reverse input refunds if the vendor is registered, and then apply the GST on the finished product. The repeated visits entailed by the new set of procedures to chartered accountants, who reportedly charge up to Rs 3,000 per visit, are an added cost, not to speak of the loss of income on the days that artisans spend on paperwork. “We aren’t adding this to our costs,” says Bhurabhai. “We’re artisans, not businessmen — we don’t even know how.”

Selling is no less of a headache. “Since craft seldom has a local market nowadays, a large percentage of small craftspeople travel to metro cities during the bazaar season,” says Tyabji. “The logistics, paperwork and additional price hikes incurred in the enforcement to register and pay taxes would make this unfeasible…” 

Further, according to the current ruling, unregistered craftspeople can’t sell their products out-of-state unless they take a temporary GST registration. Tyabji believes that this could render their exemption from the GST toothless, as it will entail the same crippling procedures that they’ll be unable to handle. Most retailers and large-scale craft businesses are waiting for the GST regime to complete three months to see how efficiently the system works. “Unfortunately, their unregistered vendors are at the bottom of the craft pyramid and have no holding power to sit back and see how all this pans out,” says Pamnani. 

Craft sector advocates fear that the twin burdens of tax and paperwork imposed by the new GST regime will soon make this sector commercially unviable.

“A fellow worker in the craft sector not given to hyperbole said the proposed 

GST would cut through the sector like a hot knife through butter,” says Tyabji, who has been observing the effects of the new GST rulings on artisans across the country with dismay. “Slice it apart it will.”

Next: Will GST ring the death knell for the‘makers’ of India?