Round Table held by intellectuals to discuss the impact of high rates of GST on the Beedi industry

Chennai, February 23, 2022: India’s 4th largest employer in the organized sector, the beedi industry is today facing some extremely challenging times. Responsible for the livelihoods of over 4.5 crore people, the beedi industry is today fighting for its survival., the All-India Beedi Industry Federation today hosted a round table discussion to debate the effect of high rate of GST being levied and its direct effect on employment in the industry.

An august panel comprising Shri. Ashwani Mahajan, National Convenor, Swadeshi Jagran Manch and Shri. B. Surendran, All India Organising Secretary, Bhartiya Mazdoor Sangh, Shri. Khallilur Rahaman, Member of Parliament (TMC), Shri. Laxminarayan Yadav, Former Member of Parliament (BJP), Shri. A.M. Prasad, Director General of Police, Karnataka (Rtd.), and Shri. M.M. Rehman, Former Senior Fellow, V.V. Giri National Institute of Labour, shared their perspectives on the subject. Moderated by acclaimed authors and conversation curators, Mr. Rashid Kidwai and Ms. Priya Sahgal, the discussion brought to the fore several pertinent issues.

“High GST on bidis is detrimental to both the industry and the workforce. The production of beedis in India provides employment to near 90 lakhs to one crore people. A majority of the workers are women who live in Naxalite areas where no alternative job opportunities exist. This is why it is becoming critical to reduce the tax on bidi or else the industry will face the risk of being counter-productive to the Indian government’s ‘Make in India’ initiative. This is because it may lead to an infiltration and a dependency on cheap Chinese cigarettes. Why import from China when we can produce in India? Domestic production and employment will take a major hit if this were to happen which will cost many people their livelihoods,” says Dr. Ashwani Mahajan, National Convenor, Swadeshi Jagran Manch.

“The efforts of the Indian government and other organizations to devise alternative job opportunities have not yielded any results. The thinking behind this to find a solution needs to be more rational in its approach. It is important for the government to reduce the current 28% rate of GST by making it mandatory for all beedi companies to register their entities under EPF and DSI and pay a reduced rate of GST. The Textile and Finance Ministry recently lowered the rate of GST on the textile industry and given the same parameters, the same must be instituted for the beedi industry,” Shri. B. Surendran, All India Organizing Secretary, Bharatiya Mazdoor Sangh.

“Beedi is an indigenous man-made product which has become the primary source of income for well over 20 Lakhs families in Bengal. The shutting down of the beedi industry will result in a severe impact on the livelihood of these families as no other alternatives have been provided to these families by the Central Government. The increase in the cost of Beedi due to high rate of GST is decreasing the purchasing power of the consumers of the product who are largely the workers in the beedi industry themselves. It is therefore advised that the Government help to lower the rate of GST on beedis to allow the consumers to retain some of their purchasing power while at the same time allowing the Government authorities to collect significant revenue,” The government had reduced the tax on Tendu leaves after GST and the revenues have gone up., therefore a similar occurrence can be expected with lowering GST on bidis. said Shri. Khallilur Rahaman, Member of Parliament, TMC.

“Beedi is associated with a myth that portrays it as a cause behind Cancer, hence in many opinions this industry should no longer survive. The alternative to not consuming beedi should the industry get shut down as a result of high rates of GDP can be the consumption of gutkha. However, the level of employment that can be generated for the gutkha industry is far lower than needed by the Beedi industry. While the consumption of beedi has not resulted in any adverse health issues, including personal. On the other hand, people consuming gutkha are often seen to contract mouth cancer and other serious health issues. Production of beedi is a source of livelihood for underprivileged women workers, and ultimately leads to women empowerment,” said Shri Laxmi Narayan Yadav, Ex- Member of Parliament

“Banning or shutting down the beedi industry, will force many people to lose their livelihoods. With most of these people living in Naxal areas, there is a high possibility of an increase in Naxal related activities in these areas. This was clearly visible when the sudden shut down of the Kudremukh mines led to an immediate rise in anti-social or Naxal related activities. Another very real threat is that of cheap Chinese tobacco imports entering the Indian market. In the coastal area of Karnataka alone, there are ten Beedi brands that not just provide an income for the family of workers but allows them to improve their standard of living. The government therefore needs to be cognizant of the fact that a high rate of GST will soon lead to a decline of the industry which will snowball further into socio-economic ramifications. This will also lead to a rise in the market for non-branded products manufactured largely in the unorganised sector which will take away the basic rights of beedi workers like minimum wage, National Holidays with pay, bonus, PF, etc. Thus, a more balanced taxation structure with lower rates of taxation needs to be established to safeguard the industry and its employees at large”, said, Shri. A.M. Prasad, Ex-DGP (Karnataka Police) (Rtd.)

Commenting on the same Mr. Arjun Khanna, Joint Secretary, All India Beedi Industry Federation, said, “Beedi industry has been playing a big role in generating revenue and employment in some of the remotest regions of India. However, the existing exorbitant rate of 28% GST due to beedis being deemed a demerit good, is having a major negative impact on the lives of the beedi workers specially women from rural and tribal areas. The Government should also understand that continuing to tax the industry at this rate may put one of India’s oldest indigenous industries at the risk of being wiped out. This will result in massive unemployment and socio-economic ramifications which will push millions below the poverty line.”

The discussion trained its lens on the impact of high rate of 28% GST on the industry and its snowballing effect on the reducing levels of employment in the industry. The change by the Government from levying a nominal tax (Central Excise + VAT in some states) to now charging a tax rate of 28% has led to a surge in manufacturing moving from the organized to the unorganised sector. This would see women workers and other marginalized sections of the weaker classes being deprived of their rights to assured basic minimum wages and other benefits like, contribution to Provident Fund, paid leaves, Bonus, Gratuity, ESI, etc.

Also, GST of 28% has seen a significant increase in the level of tax evasion. This evasion of 28% GST became an opportunity to capture then market share of organized and branded bidi manufacturers, by selling bidis at much cheaper rates. The adverse impact of very high rates of GST on Beedi Industry can be seen in the rapid decline in the year-on-year sales volume of beedis of repute or branded and law-abiding bidi manufacturers. This is largely due to an increase in the sales of illegal tax evaded cheap and duplicate beedis.

March 2020 saw the GST Council rationalise the rates on Handmade products to 5%. This consideration ought to be extended to the beedi industry as it is a handmade product. The key takeaway from the discussion was that the Government needs to take cognizance of the adverse impact of the current high rate of GST on the livelihoods of beedi workers who have little or no means of alternative employment. Just as it has of other small and cottage industry like agarbattis or even the recent rationalizing of rates for the Textile industry. Such a move will also add to the revenues of the state in the near term and address the issue of employment adequately.

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