GST: Initial Impact Sees Reduction in Logistic Time


04-September-2017  |  6 mins read

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Almost 10 days after the implementation of GST, there are mixed reactions everywhere. There is little positivity at the ground level as few changes have been observed; however at some points, confusion still prevails, whereas for some issues, the industry finds the ‘wait and watch’ scenario continuing. Positivity is existent as logistic system is improving and will improve more in the coming days. Earlier while a truck used to take 5 to 6 days from Delhi to Mumbai, today it takes only 3 to 4 days. It is being said that the exporter will get real help on lead time due to this change.

Ashok Rajani, Chairman, AEPC, informed Apparel Online: “Definitely, it is going to help apparel exporters; not only will exporters get more time, but cost may also go down as logistic companies/trucks will now charge less for waiting, in terms of the overall days. Thanks to the removal of check posts.” He shared his personal experience as he has a factory in New Mumbai and witnessed less traffic there due to the same; though the actual picture about the direct impact of this ‘reducing time’ on garment factories is yet to be seen as there is already delay in fabric delivery from Surat and Bhiwandi due to strike against GST.

Raja M Shanmugham, President, Tirupur Exporters Association (TEA), presented a valid comparison stating that his container which earlier used to take at least 12 hours to reach Cochin from Tirupur now takes only 5 to 6 hours. “Time saving is okay but cost benefit should be divided down the line which will serve the purpose of GST, and will be clear at the later stage,” he reasoned. HKL Magu, MD, Jyoti Apparels, Delhi, says that it will take him some time to get the final picture about the ‘time issue’ as till now, he has not seen any significant change in general.

Regarding the issue of 18 per cent rate on garment and made-up jobworkers, there are some miscellaneous opinions observed again as Ashok says that most of the exporters have major processes in-house. Whatever work they assign to jobworkers has negligible cost impact on the final product. Therefore, according to him, this issue is unfounded. “Exporters’ worry on this issue seems confused just because of the rates, as there is a slab of 5 per cent on cotton segment, while 18 per cent on garment and made-up jobworkers seem very high. Yes, domestic companies, who are majorly dependent on jobwork, are primarily affected due to this,” said Ashok. Though ITC (Input Tax Credit) is there, exporters feel that blockage of money for 3 to 4 months is really a concern especially for small- and medium-level exporters. Pranab Mahajan, Director, Mahajan Overseas, Panipat, however, shared a positive outlook, “We do some job for others in our process house and overall cost is now high, i.e. 2 to 3 per cent compared to the situation that existed before GST, so I don’t see any big reason to be worried. In fact, all this is due to the perceived mindset.” He further added that with the passing of time, it will become clearer and everybody will realize that there is not much hike in cost. Some other exporters shared their viewpoints specifying that ambiguity continues to lurk over issues like drawback duty, ROSL etc.

In South India, jobworkers issue is dominating the scene with TEA working actively to solve the matter. Raja, along with his team, met N.J. Kumaresh, Commissioner, Central GST Commissionerate in Coimbatore to clarify the applicability of GST for each stage of jobwork activity. After discussion, the commissioner mentioned that all the stages till cut panel (knitting, dyeing, bleaching, rotary printing, raising, brushing and shearing, roll washing, compacting/stentering and fabric cutting) attract GST at 5 per cent and from cut panel stage onwards, they attract GST of 18 per cent which includes chest embroidery, chest printing, sewing, garment washing, kaaj/buttoning, hand embroidery, checking, ironing and packing.

Raja stated to AOI that it is the right of the exporters to get ITC in lieu of GST paid but it is the SME jobworkers who are going to be hurt at a large level as earlier there was no tax at all on them and now their cost has increased to 18 per cent. Secondly, these jobworkers have to pay GST every month despite sometimes not getting payment at all or getting payment after few months. “Tirupur is totally dependent on these jobworkers, so we have requested the GST council to correct this anomaly,” said Raja thoughtfully. He also added that anomaly of 18 per cent on man-made yarns and 5 per cent on man-made fabric is also something that needs to be corrected.

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