Flat VAT on weavers

The decision to impose a flat 15 percent VAT on weavers is utterly baffling. As the VAT and Supplementary Duty Act, 2012 comes into effect July 1, it seems the traditional weaving industry is set to incur heavy losses. Our market is already flooded with cheap saris and other woven products from India, increasing competition for the local ones. With the imposition of the flat VAT, the prices of these products will increase, leading to a further fall in demand.

It has been reported that local fashion boutiques, which have been the primary promoters and sellers of our local handloom, are also going to be brought under the 15 percent VAT. Whereas we should be promoting and encouraging growth of our local heritage, the flat VAT will serve only to disincentivise the industry as a whole. The National Board of Revenue (NBR) has defended the VAT saying that there are provisions for rebates for the weavers. But here too the formalities are beyond the scope of most weavers since they involve obtaining a Business Identification Number (BIN) online, keeping records of their purchases and filing returns with the NBR regularly. These hurdles make the rebate process complex and thus, not an effective solution.

Countries around the world seek to protect heritage businesses such as that our weavers have practised for generations. They are incentivised and are branded nationally. Our handloom industry, after languishing for decades, recently saw a rise in demand through small and medium industries and fashion houses which promoted these products. Subsidising the industry would not go amiss, while instead the flat VAT decision will in all likelihood destroy it. For these reasons, we urge that weavers and our national handloom industry be kept VAT-free so that it does not perish from pressure of imported products.