With First Of Its Kind Problem-Solving Meeting For Coimbatore’s Industries, Central Government Has Finally Woken Up

A meeting of representatives of industries and businesses, located in and around Coimbatore, with Finance Minister Nirmala Sitharaman was held yesterday (11 September).

Officials from departments like goods and service tax (GST), income tax, micro, small and medium enterprises (MSME) also took part.

While one of the major issues expected to be raised by industries was that of GST refunds, a number of other things like the inverted duty structure in textiles, tax rates, the Bangladesh crisis etc, were said to be under consideration.

The meeting was significant because many in the city's business community used to feel that the central government was indifferent to their needs.

Swarajya spoke with some of them before the meeting to gauge their mood and find out what are some of the issues troubling them.

The general feeling about the initiative was positive and most of them said that they appreciated the new approach to solving problems. 

“While in earlier meetings we used to give petitions and wait for action, this one would be different as officials would take representations before the meeting with the Finance Minister and sort out the smaller issues right then. Only the bigger issues such as policy matters would be decided on later,” explained a Bharatiya Janata Party (BJP) functionary, who is an industrialist himself.

“The two biggest industries in the city are textiles and pumpsets and thus most of the demands are likely to be from them,” he added. 

High Cost Of Cotton Affecting International Competitiveness

The major issue plaguing the textile sector of the region is the rising cost of production. While increased wages and labour shortage have been discussed widely in the last year or so, there is also the issue of high cost of cotton in the domestic market compared to the prices prevailing in other countries.

Speaking about the same, Prabhu Damodharan, convenor of the Indian Texpreneurs Federation explained, “One of the reasons for the high price of Indian cotton is the grant of Minimum Support Price (MSP) to farmers. While that is good and has ensured the stability of their income, the competitiveness of industries has been affected.

“The best way forward would be to remove import duties and in case that is not possible right away, the government should consider reducing it to like say 5 per cent.”

Asked about the inverted duty structure in the textile sector, (GST rates on inputs are higher than what has been fixed for the final products), due to which companies have had to file for refunds, Damodharan said that it is a complicated issue with people making a number of suggestions.

“A lot of proposals have been submitted to the government regarding this. We would like to know from the Finance Minister as to what they are thinking about it and hope for a rationalisation to happen soon.”

Continuing further, he said, “Textile firms are also likely to raise the issue of some banks not giving letters of credit when dealing with Bangladeshi companies.”

While the recovery of the garment manufacturing sector is one of the top priorities of the neighbouring country, it is still reeling from law and order problems and power shortages after the ouster of Sheikh Hasina.

Duplicate GST Bills Causing Losses To Metal Scrap Traders

Though the textile sector gets much of the attention, and understandably so, the difficulties, especially with regards to GST, are not limited to it.

Sathish Kumar, who is involved in supplying metal scrap to foundries said, “There is a massive problem of duplicate GST bills in this sector. And in Coimbatore alone, there is a loss in revenue of Rs 200-300 crore per month due to this. It is encouraged by some companies selling thermo mechanically treated (TMT) steel bars as they too do sell half of their produce without proper billing." 

When asked to illustrate the issue with an example, Kumar said:

“For example, if a genuine trader buys goods at Rs 30 and the GST is 18 per cent, the cost comes to Rs 36. So he has to add a profit of a few rupees and sell.

“Traders doing duplicate billing are spoiling the market. They would buy the scrap at Rs 31 instead of Rs 30 and then sell it at rates similar to what those who are genuinely paying GST would do.

“Thus, they make a handsome profit while harming the interests of genuine traders.”

Technical Issues With GST Filing Causing Stress On Working Capital

Asked about the issue of GST refunds, about which there have been allegations that officials demand commissions of 1 to 2 per cent, Kumar said that there are technical issues in the system, which are making it difficult for businesses, especially those having small scale units.

“Consider the following situation: In cases where materials are returned by the party I sell to and then subsequently I return them to the supplier, unless the requisite documents are uploaded by all, the burden falls on me. It is only adjusted in the next month. 

“If it is a small amount of Rs 1-2 lakh, the business can bear it but when it involves amounts like Rs 20-25 lakh and more, it affects the availability of working capital, which is critical to MSMEs.” 

“Therefore, GST funding at nominal interest rates is also something that the government can explore.” 

Financial concerns like the ones mentioned above were echoed by others too and they wished for more favourable terms of credit. 

Need Pandemic Type Loans Again, Increase Duration To Designate Loans Of Small Industries As NPAs

Naga Shanmuga Sundaram, an industrialist involved in mechanical manufacturing, said, "During the coronavirus pandemic, the government had granted loans for a 48 month duration. We would like it to sanction similar loans for MSMEs who have paid their dues on time. This would help a lot of people."

Continuing further, he said that rules stipulating declaration of loan accounts as non-performing assets (NPAs) in case of payments not being made within a 90 day period, should be relaxed for MSMEs.

"A 180-day window would be beneficial for us as it would give us ample time to collect payments and not force us to give up on our working capital," Sundaram explained.

When asked about the 45-days payment scheme for payments to suppliers, he said, “While big corporates are able to do so, the smaller companies, like those which are classified as ‘micro’ industries are not able to do so." 

Finance Ministry Has To Up Its Communication Game

Queried about the feeling that the central government had not been receptive to the needs, Sundaram said that there has been a lot of misinformation and misunderstanding. 

“Take the example of the GST on milk cans. Most of the vernacular media wrote that these cans would be taxed at 12 per cent giving an impression that the item was newly brought under the purview of GST.

“The reality was that these cans, which were earlier taxed at 18 per cent, were moved to a lower slab rate of 12 per cent.

“I believe that the communication from the ministry should be much better. Issuing a simple press release with text is not enough. They should include pictures and give details of what was the tax structure earlier. If possible, they should even show the products while doing a press conference so that people understand.”

Thus, while industries in the Coimbatore region have approached the meeting with renewed hope and expectations, it remains to be seen as to how far the central government is able to meet their demands and help the sectors facing difficulties. Nevertheless, it is a good beginning that could pay not just economic but also electoral dividends.