The implementation of Goods and Service Tax (GST) has had a cascading effect on the Indian handicraft industry. The sector has noted a noted 25 per cent drop in business since the new tax regime has come into effect.
The classification of handicraft items under various GST slabs of 5 per cent, 12 per cent, 18 per cent, and 28 per cent has made the products expensive.
Before GST, some of the handicraft products were attracting just 5.5 per cent tax and the majority of products was tax-free.
According to G C Kishore Kumar, General Manager (Finance) of Karnataka State Handicraft Development Corporation Limited (KSHDCL), higher tax rates have resulted in lower sales that led to an average monthly business decline from Rs. 4.3 crores to Rs. 3 crores.
GST came as the second setback to the industry after demonetisation (announced in November last year). After note-ban, the handicraft industry noted a decline in business to Rs. 51.5 crores in 2016-17 from Rs. 54 crores in 2015-16.
A further drop to Rs. 39.5 crores is expected in business this year.
A policy issue in GST that makes the purchase from small manufacturers a profit-losing exercise has further worsened the situation for small artisans, informed the KSHDCL official.
The Karnataka Chief Minister has assured artisans to raise the issue at the GST Council Meet scheduled for November 9.