· 90% of the silk produced in the country is used for domestic consumption, mainly for the manufacturing of silk sarees. Weaving of silk in India is done on both handlooms and power looms.
· 70% of raw silk is consumed by handloom sector and 30% of silk is utilized by power loom sector.
· No demarcation on the silk fabrics produced by the handloom weavers and power loom weavers in the GST rate schedule. 5% GST has been imposed on silk fabrics
· GST rate for silk machineries has been kept at 18%. The raw silk is exempted from paying GST, the tax input credit on the machineries used for silk cannot be passed down to the value chain by the silk reelers, who purchase the machineries. Therefore, the entire tax burden of machineries is required to be borne by the silk reelers.
· The rising cost of silk machineries would affect the profitability of silk reelers and silk machinery manufacturers due to decline in sales. Due to this situation it is said that the silk reeling and twisting machineries may be fully exempted or kept in the 5% tax slab.
· Exports shall be treated as ‘zero rated’ supply and hence there will be refund of input tax credit.
· Manufacturers and exporters in this sector mostly belong to most micro, small and medium enterprises (or MSMEs) and unless necessary exemptions are introduced, exports would suffer.
· Cumbersome process for the refund of input tax credit as the refund requires submission of at least 37 returns annually; it will be a cumbersome process that will lead to blockage of funds and impact working capital flows.
· Unemployment of skilled workers in rural areas as this sector involves numerous small transactions making it impossible to claim refund of GST by the job workers and small exporters.