SURAT MARKET REPORT : JUNE 2017

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MMF traders starts indefinite strike opposing GST : Business losses of more than Rs.1000 crore 

 

Country's largest Man-Made Fabric (MMF) production centre, Surat is come to a grinding halt as over 70,000 textile traders has started indefinite strike against the Goods and Servives tax (GST) regime. Earlier in June, Textile GST Sangarsh Samiti (TGSS) has demanded exemption from GST and had kept total 4 days of strike. But when central government has not given any relief and refused their demand, the samiti has called indefinite strike from July 3. The entire textile industries including weaving, processing, trading is adversely affected and incurred business losses to the tune of over Rs. 1000 crore in total week period. 

 

Powerloom weavers and textile traders are unhappy with higher tax rates of 18 per cent on yarn and 5 per cent on fabrics under GST regime. On monday(3rd July) morning, the situation at the textile markets on Ring Road was tensed as large numbers of traders gathered to protest against GST. Some group of people and police were enforcing the traders to open their shops and when they refused, police resorted to lathicharge. After the police action, traders shouted slogans against local leaders and government at the Centre. All the 165 textile markets on the Ring Road shut on the part of the indefinite strike call given by the Textile GST Sangarsh Samiti. 

 

Textile market sources said, there are complexities in the GST rates, on the man-made fabric (MMF) sector. While cotton attracts a uniform 5% rate, the synthetic fabric attracts 18 % at yarn stage, 5% at fabric stage and 5% at the job-work stage. Moreover, the option for claiming input tax credit (ITC) has been removed for the sector. There is too much paper work and small traders has to face immense difficulties. The implementation of GST would badly hit small and medium textile and its allied industries. The samiti members and traders declared that they will not accept GST and will observe bandh(strike) until their demand for exemtion from GST will not be accepted.

 

Due to the traders strike, there is no demand of grey fabrics and hence production of around 3 crore meter of fabrics manufactured by powerloom weaving sector has come to a standstill. The textile powerloom factory owners has cut down the grey fabrics production upto 60%. In some industrial area, weavers had shut their factories for 3 days in a week and are running machines in one shift only. Consequently, textile processors and embroidery machine owners does not have any job-work. It is noticable that, over 10 lakh workers in the textile markets, powerloom weaving units, textile processing sector, embroidery units and ancillary units are bearing the brunt of the strike. 

 

GST effect : Yarn prices surge upto Rs. 3/kg. 

 

The synthetic yarn prices in the city increased upto Rs.3/kg. after implemention of Goods and Servives tax (GST) from July-1. The Central Government has fixed 18 per cent GST on man-made fibre and yarn and this has lead to surge prices in the first week of July. The prices of all qualities of texurised yarn, Airtex deniers and Roto based deniers are increased by Rs.2/kg. and all deniers of FDY yarn suged upto Rs.3/kg. Though the prices are up but powerloom owners are not keen to stock yarn. 

 

Because of lack of grey fabrics demand, the weavers has stopped yarn puchase and have cut the production due to confusion in new GST tax system. Yarn manufacturers, spinners are afraid of stock clearence. The textile traders are demanding exemption from the GST and are on indefinite strike. Market sourced said, the higher 18% GST tax slabs at yarn stage has hit hard the small weavers of the city. The weavers are in wait and watch mode to stock yarn until the situation is clear. 

 

18% higher GST : Huge quantity of Cheap Chinese MMF dump in Surat

 

Surat Man-Made Fibre (MMF) producers has made representation to government to reduce 18% higher GST on MMF and yarn. They fear thet higher tax rate will pressurise local manufacturers to source yarn and fabrics at a cheaper rate from China and other countries. As per new tax system the chinese synthetic fabrics cost will come down upto 19 per cent. The production cost of MMF, synthetic fibre and yarn are higher in India compared to China, Indonesia and South Korea. Moreover, these countries have lowest tax and high export incentives to produce and supply MMF textile goods in the global market. 18% higher GST rate on MMF, yarns will adversely affect the domestic MMF fibre and yarn industry. India's textile MSME sector will not sustain on account of high tax rate and result in distorting production and consumption. A big quantity of cheap fabrics will dump in local market and this will paralyzed the MMF sector in the city.

 

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