The long wait for the Goods and Services Tax (GST), which was introduced by the Centre recently, has disappointed producers of safety matches.

There was much anticipation that the different categories in production would be brought on the same platform under a uniform system of taxation.

But the recent announcement of 18 per cent GST on production of safety matches by semi-mechanised and fully mechanised units has shocked stakeholders.

“This industry has almost been sent out of business,” said J Devadoss, Secretary, South India Match Manufacturers Association, Kovilpatti.

The introduction of 5 per cent GST on a non-existent handmade sector was unnecessary, he said. As there was a huge difference in GST among the production categories, it would lead to large scale irregularities and pave way for tax evasion. Hence, a balanced taxation was required to safeguard the declining industry. Since production was done primarily with the aid of mechanized units, the finished goods could be wrongfully claimed as “handmade” to evade a higher tax rate. Moreover, handmade production would also give rise to child labour.

Owing to non-availability of labour after 1990, producers switched over to mechanisation, he pointed out. Since 1996, the handmade sector vanished completely, and the mechanized units were relied upon to offset labour shortage.

Prior to the introduction of GST, manufacturers paid six per cent excise duty on total goods manufactured through semi-mechanised units, 12 per cent duty for matches manufactured by fully mechanised units, and incurred a 5 per cent sales tax. Besides, service tax was also levied based on utility of logistics.

Before 2003, four categories existed based on labour potentiality and duty was levied accordingly. Excise stamps in colours were supplied under categories including tiny sector (yellow), small scale industry (blue), partially mechanised (red) and fully mechanised (maroon), Devadoss said.

After 2003, the excise duty was not levied for the fully handmade. Duty was levied for partially and fully mechanised units sans excise stamp.

The hike in tax in the form of GST would adversely affect the industry, said Paramasivam, President, National Small Match Manufacturers Association, Kovilpatti.

So far, value added tax (VAT) for production by mechanized units had not been levied by the State government at all. Considering the shortcomings of the industry, the Centre should at least slash the GST.

Source: The Hindu