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Khadi & Village products become expensive post GST

The products of the Village Industries sector were either taxed at the rate of 0-14.30% before-GST and post-GST the same products attracts tax at the rate of 12-28%

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The Ministry of Micro, Small and Medium Enterprises (MSME) has approached Ministry of Finance to consider the Khadi & Village sector for exemption from GST or to ensure a seamless flow of input tax credit in order for Khadi Institutions to claim input tax credit, Giriraj Singh, Minister of State for MSME said on Wednesday. 

Reply to a query in the Rajya Sabha, Singh said that while the Ministry welcomes the introduction of Goods and Services Tax (GST), however, village industries sector witnesses higher rates.  

“The entire Khadi & Village Industries (KVI) sector has been enjoying the benefit of tax exemption even under the pre-independence era. With the exemption to the SSI sector being drastically reduced from the existing Rs.150 lakh to Rs.20 lakh, the exemption cover enjoyed by many of the Khadi Institutions (KIs) has been removed,” he added.  

Khadi Institutions (KIs) are now mandated to obtain registration under GST and also pay GST on various Khadi products which is 5 percent. “The products of the Village Industries sector were either taxed at the rate 0-14.30 percent before-GST and post-GST the same products attracts tax at the rate 12-28 percent,” Singh said.   
   
At present only Khadi yarn produced in Khadi sector is exempted, while other Khadi products attracts 5 percent GST.  .
           
Earlier, MSME Minister Kalraj Mishra was hopeful that khadi products would be exempted from GST which came into effect from July 1. Various khadi and village industries products attract different rates of GST ranging from 5 to 12 per cent. He had disclosed that the Finance Minister had promised he would give GST exemption to ensure financial development of the economically backward lot of weavers and spinners.

While 5% GST has been imposed on Khadi cloth currently, 12% GST has been imposed on the sale and purchase of readymade Khadi products priced above Rs1,000. Khadi yarn, Gandhi topi and India’s national flag, however, have been kept out of the purview of GST.

The tax on Khadi, which had been free from any kind of taxation since 1947, has hurt Khadi traders across the country. Khadi associations made several representations to the government, requesting it to waive off the tax, citing the financial stress of weavers and spinners.

Products of the Village Industries sector under pre-GST & post-GST

 

Items

Before (GST)

After (GST)

    Dona plate

5%

18%

PVC Scrap

5%

18%

Ayurvedic Medicine

0%

12%

Sanitary Hardware & Paint

14%

28%

Marble & Granite

5-14%

28%

Electronic Weighing Scale

5.5%

28%

Lock

5%

18%

Mentha

5%

18%

Solar Plate

0%

18%

Textile sector

0 to 5%

18%

Gobar Gas/Bio Fuel Generator

0%

18%

Agriculture Diesel Engine (upto 12 BHP)

5%

28%

Plywood

14.30%

28%

Sewing Machine parts

5%

12%

Detergents

5%

28%

Glassware boll (Kancha)

0%

18%

Tractor attachments

14%

28%

Weighing machines

14%

28%

Wet grinders

14%

28%

Compressors

14%

28%

Packing Machines

14%

28%

Auto-parts

14%

28%

Garage Equipment

14%

28%

Hand-made soap 

0%

18%

Hand-made paper 

0-4%

12%

Herbal Shampoo 

5-12%

28%

     Leather Products 

5-12%

28%

  Farm Machinery for Soil 

5%

12%

  Harvesting Machinery

0%

12%

   All Food Mixes 

5%

18%

 Hand- mechanical appliances

5%

18%

 

 

 

 

 

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