Surat textile weavers and processors have entered their third critical point in one and a half years. In November 2016, high-value currency notes were withdrawn, immobilizing Surat as its economy was largely cash based involving small processors and migrant employees. Last July, the industry was shut for long after the Goods and Service Tax was imposed, rendering a big blow to textile processors, whose cost increased sharply along with compliance burden.

Post GST, there has been a fall in Surat synthetic fabric production by a third. Daily operating shifts have reduced from three to two. Polyester yarn prices have increased six per cent to eight per cent in the past one month and 12 per cent to 15 per cent in the past three months.

This is happening at a time when fabric demand is low. Demand will revive only when the festival season begins a few months later. Due to an extra month in the Gujarat calendar, festivals will start with a month’s delay. Power looms have another problem. Synthetic fabric has five per cent GST but yarn attracts 12 per cent GST. This means when selling fabrics, they will not be able to claim full GST paid of yarn and hence huge amount of unused tax credit will remain in their books.