Visakhapatnam: The textile business in the city has faced headwinds in the form of Goods and Services Tax (GST) during this festive season, while it had received a severe blow due to demonetisation last year. Merchants are struggling with the steep decrease in sales. They are facing difficulties in clearing old stock. About 200 shops in poorna market and 150 retailers at police barracks witnessed a drop in sales. Barracks cloth merchants association president V. Siva Prasad said that wholesalers have troubled the local retail cloth merchants to give new stock as they don’t have GST identification number (GSTIN). They are planning to buy collectively with a single GSTIN from next year.
The retail traders feel the GST of 5 per cent on textiles and 12 per cent on readymade garments quite high. Earlier, there was no tax on yarn and cotton textiles. The value-added tax on ready-made garments was around 5-7.5 per cent. Most textile retailers in the city are unorganised and there was a gap in flow of input tax credit. GST enforces them to the organised sector for smoother input credit system, said Suneel Dasari, CEO of online tax platform EZTax.
He explains, “Input tax credit is the difference between tax paid to the distributor and tax collected from the customer. It is a credit when purchases are higher than sales, and vice versa.”
Input tax credit is not permitted if the registered taxpayers purchase the products from the unorganised players. It will be an issue if the items are procured without raising a proper tax invoice, Dasari informed. However, the impact of GST is seen only at small-scale traders. Large-scale outlets and shopping malls are doing good business. With several new showrooms coming up in the city, the competition has led them to bring down the prices. According to CMR Shopping Mall CMD Mavuri Venkata Ramana, there was a growth of 10-15 per cent in the business during this year when compared to previous year. “The small-scale traders cannot avail input tax credit while the shopping malls get it. We are passing the benefit to the customers by offering discounts,” he said.
