Nearly 2,000 working units of the knitwear/readymade garment cluster in Tirupur, employing more than a lakh people, called for a day’s strike on July 21 to protest against the decision to place them under the 18 per cent GST slab.

Among various jobs at Tirupur, knitting, dyeing and compacting attract only five per cent of GST, while other works such as printing, embroidery, button fixing, checking, ironing and packing are attracting 18 per cent.

Manufacturers say even finished garments attract only five per cent GST and there is no logic in bringing small and tiny job working units under 18 per cent. They say that since the cluster functions under a 90 day credit format (in the value chain), such a high GST will put the sector under financial stress, which will render people jobless.

Levying 18 per cent tax is seen as disturbing the seamless credit flow and defeating the very objective behind GST. The problem is said to arise from the fact that due to the global economic situation, many foreign buyers have started operating on a credit basis where payments for exported goods are realised from 90 to 150 days from the date of shipment. This credit period is generally passed to every segment of the value chain whereby job workers are paid with credit terms of around 90 days.

In this scenario, the situation where small and tiny job workers have to pay 18 per cent immediately at the end of the month, despite their payments being realised much later, is expected to create a huge working capital blockade causing financial stress to micro and small industries.