July , 2018
GST impeding the handicrafts sector
16:43 pm

Kuntala Sarkar

Readers familiar with Bengali literature are likely to be acquainted with Manik Bandyopadhyay’s famous short story Shilpi (artist). The protagonist Madan Tanti (weaver) refused to weave towels and stop producing the famed Benarashi silk sarees as ordered by his Zamindar. The story set in pre-independence India explores the plight of weavers like Madan Tanti who were then forced to withdraw from their traditional craft of weaving Benarashi silk sarees and instead forced to weave towels by their Zamindari lords. The story reveals the conflicts faced by these weavers and was a brilliant representation how traditional artisans were forced out of their trade.

Cutting back to the present, recent government data show a nearly 30% drop in traditional artistry and employment in the handicraft sector. Handloom is an important part of the Indian handicrafts and the segment has been negatively impacted by the recently rolled out Goods and Services Tax (GST). Marking this year as the worst year for his trade in the last decade, Supendra Basak, a textile businessman of Phulia, Nadia district, West Bengal said, “Unfavourable effects of GST can be clearly seen in the handloom industry. GST refunds and hazardous way-bill procedures are delaying our progress. Another problem is that the new tax regime does not distinguish between handmade and machine made products. That is unfair and hampers the growth of the industry.”

Problems of the handicraft sector in India

The handicraft sector in India is under pressure for some time now. Most of the artists producing handicrafts are economically marginalised, with very limited capital. There have been reported cases of bankruptcy as many of these artisans undertake loans to procure raw materials but are unable to repay them due to unfavourable market conditions. Depressing market conditions for handicrafts are forcing many artists out of their age-old professions. The markets are being flooded with cheaper machine made varieties of products which are giving handicrafts and handlooms tough competition. Additionally, the niche market that is there for such hand-worked products remain constricted. The sector needs active support from governmental bodies to reinvent itself. Availability of handcrafted items needs to expand and traditional artisans need a certain degree of governmental hand-holding and active private support. Snehashis Sarkar, COO, Biswa Bangla Marketing Corporation said, “There is an increasing trend of migration of occupation as far as traditional artisans are concerned.” 

Phulia is one of the handloom centres of West Bengal. Mahadev Basak, a weaver from Phulia stated, “Under the Goods and Services Tax regime, yarn is taxed 5% differently, while the tax rate for finished textile products is 12%. We must file tax two times for the same product. Our profit margin is dipping due to this.”

Gupinath Basak, another weaver explained, “We cannot cut the production cost because the rates of the raw materials are not reducing. Such aggressive taxation may force weavers like us out of the handloom trade.”

The easier alternative is the power loom. But that needs large capital investment which very few of these handloom weavers can afford. Rahul Basak, a young weaver from the village stated, “Unless there is a significant restructuring of the tax slabs, our trade cannot survive.”

India’s total working age population is around 480 million. Only 7% or about 33.6 million people work in the organised sector. 93% of our population or 446 million people are in the unorganised sector. Many of them are semi-literate or illiterate. The craft sector employs about 11 million people of which around 43 lakh are employed in the handloom sector. The price received by these artisans for their products differ widely in different locations. The government needs to take steps to preserve these traditional skills which are cultural symbols as well and that can only be accomplished when the artisans are promoted and protected. Over taxing handicrafts may lead to a decline in this trade as it is linked to millions of Indian artisans who operate on slender margins.

The emporiums that exhibit and sell handicrafts are facing problems as they are unable to accrue input credit on most of their transactions. This is because most of their suppliers are local artisans who work out of their homes with very little turnover. Thakurpada Dey, Manager (Finance) of Pragjyotika Assam emporium in West Bengal said, “Basically, most of our suppliers are not registered with the GST network. It is not because they don’t want to pay taxes; they are just very small, rural, family-run enterprises. So, we get no input credit on any of what we buy from them but we collect our products from them because we want to encourage these small artists.” Till date, many government undertaking shops are buying products directly from the weavers and artisans who are not GSTIN registered and foregoing the input cost benefit. It is being done to promote the artisans but this cannot be a permanent long-term solution. The GST structure needs to be reconstructed or the government should take steps to register all artisans and handloom workers under GSTIN.

Ways to boost the sector

The handicraft sector can be strengthened if a cogent mix of Business to Consumer (an enterprise sells handicrafts directly to the consumer), Business to Business (enterprises increase the sale of their wholesale products) and Business to Government (business houses directly deal with government offices) approaches are undertaken. Additionally, strengthening self-help groups and government affiliated organisations working with traditional artisans can give a fillip to the sector. Regular training and governmental subsidies can also aid the sector. 

Sarbani Ray, a terracotta artist from North 24 Parganas, informed, “The market is lacking in demand for artistic ornaments and jewelleries. The present market is high in demand for junk jewellery. Such changes in consumer preferences impact our sector as local artisans need time to adapt to these new advancements.”

The government needs to promote the sector by aggressively marketing these products. Fairs and exhibitions need to be arranged more regularly to promote handicrafts. These products have the potential to generate interest in overseas markets. The government needs to promote handicrafts in overseas markets as well. Expanding the regular government undertaking shops selling handicrafts in newer locations can be a way out. There needs to be more presence of these shops in tier II and tier III cities. The Tribal Cooperative Marketing Development Federation (TRIFED) has introduced a chain of 38 retail shops called TRIFED INDIA and aims to promote tribal jewellery and home decor products. Such initiatives can help the sector.


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