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Hanging By A Thread: Why The Introduction Of India's Tax Reforms Is Crippling Craft Communities

12/10/2017 11:20
Anurag Chaubey / EyeEm via Getty Images

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Photo by Igor Ovsyannykov on Unsplash

This year India went through one of the single biggest tax reforms since Independence. Designed to unify the country into a common market, the Goods and Services Tax promises to transform India's economy. But only a few months in, the cracks are beginning to show.
The GST is crippling India's craft communities and as always, it's the poor that suffer the most.

So why does this news bother me? Well, as a retailer of fair trade handloom accessories crafted by artisans in India, it makes sense for me to keep my ear to the ground. But it's more than that. I have a huge respect for those artisans who create such beautiful textiles.
Scouring the news online, I click through sad images of skinny artisans sat by idle handlooms. Handlooms that once filled the room with their clattering sounds, now lie silent. I see protests taking place all over India. Angry fists punching the air. Orchestrated strikes rising up from as far as Andhra Pradesh to Bengal. I read about Kashmiri carpet weavers with no work and sweet shops in Kolkota staging strikes.

It's affected a lot of people in the craft industry. In particular, rural self employed handloom weavers. Previously taxed at 0%, they now have to pay a 5% tax on raw materials. Manufacturing costs have gone up, orders have stopped coming in and rigorous paperwork mixed with confusing processes has disabled the illiterate.

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Photo by Igor Ovsyannykov on Unsplash

Eleven million people work in the craft industry and many are either semi-literate or illiterate. They don't have registered businesses or accountants to help file their online returns, which now have to be completed three times a month. With no access to a computer, an accountant or an essential GST number to sell and ship their products, the future looks grim.
Wanting to find out more, I contacted House of Wandering Silk founder Katherine Neumann. As a social enterprise partner, I was keen to find out her thoughts;

The VAT tax system before was a big mess - full of loopholes and different across states and with so many tax brackets. GST helps to streamline and standardise the tax system here and has closed out a lot of the loopholes. But I think it was a mistake to raise taxes on the handloom sector. Some of our partners have had their textiles stuck with them, unable to post, as the couriers are demanding GST numbers to ship their goods. These people shouldn't be required to pay taxes. India has a very low rate of taxpayers, in other words most people and businesses are evading taxes. I think it would make more sense to focus on those who should be paying lots of taxes and make sure they do.

The harsh realities are that many artisans live below the poverty line in sub-standard mud brick housing. The majority are women, which in India brings with it huge challenges of gender, caste and social inequality. Though not reported widely, many weavers have succumbed to suicide, as increasing debt, rising prices of raw materials and shrinking markets push them over the edge. With little access to infrastructure, competition from cheaper machine-made textiles and profiteering middlemen - the GST just seems to be another blow to the already hard life of an artisan.

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Photo by Igor Ovsyannykov on Unsplash

The issues haven't affected my business - yet. However I'm concerned about the future of handloom. The handloom sector is the second largest economy in India. Almost 95% of the world's hand-woven cloth is from here. Taking influence from the diverse cultures and regions of India, it's labour intensive methods and skills passed down through generations, has earned the respect of the world. So why isn't it celebrated in India like it is in the luxury market overseas? To see the decline of this industry would be a huge cultural blow to India and to us. As one of the most sustainable and green economies, the Indian government should be pushing this industry globally. It seems ironic that they are not doing more, considering there are many government funded fairs and events promoting weavers and textiles. There's even a National Handloom Day.

On one hand the Indian government champions its craft industry but on the other, it's taxing the very means by which the industry can prosper. It's preventing the poor from even earning enough to survive. By inadvertently targeting the vulnerable, they are alienating talent and potentially contributing to the exodus of rural workers, who would be forced to close their businesses and seek alternative employment in towns and cities.
As a brand that promotes the beauty of textiles and skills of artisans to a global market, I hope the protests don't fall on deaf ears and the movement to bring tax relief to the handloom industry succeeds.

After all, it's part of India's history and heritage. It's part of its DNA.

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