Is 0% GST on handloom the solution?
{Disclaimer: This post is not about any political party or ideology. It comes from my lived experience as an entrepreneur in the craft sector.}
When campaigns circulate demanding a complete removal of taxes, they often risk becoming more like opinion polls. Ask any artisan or industrialist if they want to pay taxes, and the instinctive answer will be no. Yet no society or economy in developing countries can strengthen itself by escaping taxes altogether. The real question is not whether taxes should exist, but whether they can be designed to be fairer, lighter, and more responsive to the realities of the grassroots.
It is also important to note that weavers with an annual turnover below ₹40 lakhs are already exempt from GST, or can opt for the “composite tax” and pay just 1% of turnover. But how many weavers even reach that scale? Government data show that the average weaver’s income is less than ₹ 10,000 a month, a figure that alone should prompt us to pause and think.
Reliable data on the handloom sector is scarce, but a few research papers shared by a few friends with me shed some light:
- A Study on Credit, Marketing, and Sustainability Issues of Handloom Industry in and outside Cooperative Sectors – NABARD
- Impact of GST on the Textile Sector – Saroj Lakhawat & Shailendra Singh Charan
- Impact of GST on Branded Textile Products – A.S. Sreeshma, M. Aswamalika & V. Aparna
- Impact of GST on Textile Hub of Mumbai – Shebazbano Khan & Dr Rashmi
- GST Effect on the Textile and Apparel Industry of India – An Overview – Meenu Shrivastava
- Impact of GST on the Handloom Sector: A Case Study of Production and Sales Performance – Dr Hema Srikumar & Mrs J. Karunambikai
A few clear patterns emerge. Most stakeholders still find GST complicated; filing returns, decoding HSN codes, and claiming input tax credit remain challenging. Raw material costs have risen, forcing artisans to absorb losses to maintain steady prices, which often reduces their earnings. At the same time, some studies indicate that over the long run, GST could bring greater transparency, make exports smoother, and help the handloom sector become more organised.
Would a 0% GST on handlooms really guarantee better sales or fair wages for weavers and all other pre- and post-processing workers?
Take Khadi as an example. Fabric sold through Khadi Bhandars is already exempt from GST, yet stocks remain unsold, wages stay low, and arrears pile up. People don’t walk in because of a tax exemption, but they come for the 35% rebate. Let’s be honest: the same consumer who buys polyester flags on Independence Day often won’t spend on even a simple Khadi handkerchief.
This leads to a painful realisation - perhaps handmade fabric no longer resonates with the common man. If that were the case, we would see more people choosing Khadi.
So, is GST really the problem? Not entirely. At its core, GST was a reform intended to replace a complex system of CST, VAT, octroi, excise duty, and entry tax. It streamlined exports and promised transparency. But any good idea stretched too far becomes its own problem. The way GST is implemented, along with the complexities of the portal, continues to frustrate those of us on the ground.
So, how, when, and who actually pays tax?
I know I’m simplifying a bit, but here’s how it works. A spinning mill sells cotton yarn to a weaver at 5% GST. The weaver turns it into fabric and sells it to an entrepreneur, also at a 5% markup. Since the weaver has already paid tax on yarn, the balance is offset. Later, when the entrepreneur converts the fabric into clothing and sells it at 18% GST, they can deduct the 5% already paid to the fabric, effectively paying 13% to the government.
This system works only if everyone has a GST number. Without it, a weaver pays tax on yarn but cannot claim it back on fabric sales, pushing that cost onto the final price the buyer pays.
In truth, no one in the handloom chain is paying GST from their own pocket. We act as middlemen, collecting taxes from the consumer and passing them to the government. That is the essence of an indirect tax.
The real strain arises when GST rates on handloom go up. Prices rise, consumers hesitate, and sales dip. Often, prices are cut to maintain sales, and this pressure typically trickles backward, meaning that spinners, weavers, printers, and tailors receive lower wages. In a way, it feels like the craftsperson is made to subsidise the consumer’s reluctance to pay a fair price.
This is not merely a GST issue. It is a mindset issue, wanting handmade to be cheap, while happily paying 40% tax on cars. Handmade isn’t expensive; our perception is cheap.
But hasn’t GST been reduced on many items recently?
A ₹10 chips packet had 12% GST earlier, meaning ₹8.94 for the chips and ₹1.06 as tax. Now that tax has dropped to 5%, it should cost ₹9.40. But here’s the suspense: will the packet actually sell for ₹9.40, will the company keep it at ₹10 and enjoy the extra profit, or will they pump in more air into the packet so it still looks “value for money”? Guess we’ll only find out when we tear it open and see whether we get fewer chips or a lungful of GST-adjusted oxygen.
Apparently, cars exceeding 4 meters in length have been reclassified to the “sin” category, now carrying a new 40% GST rate. However, upon looking closely, one realises that they were already paying 28% plus a 22% cess earlier. That’s 50%! Which means, after all, the “sinful” long car is actually a little less guilty now. Essentially, GST has undergone a diet and shed 10% of its weight.
Meanwhile, a polyester-blend T-shirt made abroad, branded elsewhere, and sold here at ₹2,299 attracts just 5% GST. A handmade garment, crafted locally by more than a dozen skilled hands and sustaining rural livelihoods, faces 18% GST only because it costs more than ₹2,500.
The irony couldn’t be sharper: machine-made gets concessions, handmade carries the burden.
My earlier claim that businesses with a turnover under 40 lakhs are tax-exempt, or can opt for a 1% composite tax, was only half the story. The fine print is where the real drama lies. Those who choose these schemes are locked within their own state’s borders; they can’t sell outside. For e-commerce businesses, turnover doesn’t even matter; GST is compulsory from the very beginning, from the very first rupee.
Even with a GST registration, if an entrepreneur participates in an exhibition in another state, they are forced into yet another bureaucratic maze. A fresh, temporary GST number must be obtained for that state. The process—multiple forms, system crashes, and in some cases, advance tax payment before a single sale is made—makes a root canal sound easier.
Let me be clear: I am not asking for pity. I am asking for parity. I don’t want hand-holding; I want the hurdles removed. I will pay tax, and I will question the policies.
Because if we continue to demand 0% GST, we risk being seen not as the backbone of this economy, but as a burden. Not as an industry with potential, but as a source of nostalgia. Perhaps, the harder truth is that we are not yet asking the right questions.
As someone who agrees to collect and pay the tax, I have some questions.
1] I will pay tax, but why does a so-called fibre-neutral policy treat cotton yarn and polyester yarn the same? Where is the incentive for a weaver or entrepreneur to stick with cotton when the harmful polyester alternative is taxed identically?
2] Paying tax is not the issue, but how are we rewarding the next generation of craftspeople and designers who choose organic cotton, natural dyes, and hand-making? Why does the tax system place them on par with chemically dyed, synthetic yarns and power-operated machines that pollute far more?
3] I have no objection to paying tax, but what is the policy logic behind a ₹2,500 cut-off that pushes handcrafted khadi garments into the 18% GST bracket? In contrast, imported synthetics, machine-woven fabric, and factory garments remain cheaper and taxed lower.
4] I can bear the tax, but if we genuinely believe in “One Nation, One Tax,” why must businesses apply for separate temporary GST numbers in every state? Where is the promised ease of doing business in a supposedly unified market?
5] I can pay the tax, but why does KVIC, which trademarked “Khadi” and licenses it for a fee, turn a blind eye to counterfeit Khadi openly sold on e-commerce platforms? Why this gap between intent and enforcement?
6] Paying tax is my duty, but under the Handloom Reservation Act, 11 items — including sarees, dhotis, and towels — are legally mandated to be produced only on handlooms. Yet, this rule is openly flouted across the nation. Who is accountable for enforcing safeguards meant to protect the very existence of the handloom?
7] Tax isn’t the issue, but under the Yarn Reservation Act, spinning mills are mandated to reserve a portion of production for handlooms. Why then do we face recurring yarn shortages? Is this policy enforced in practice, or does it survive only on paper?
8] I accept the tax, but policy also requires every state government to procure a quota of handloom fabric for internal use. Why then is procurement irregular, delayed, and poorly planned—leaving craftspeople stranded with unsold stock?
9] I will shoulder the tax, but why are handloom craftspeople and entrepreneurs not automatically recognized with carbon credits? Our work already reduces emissions—using local fibres, natural dyes, and human skill over fossil-fuel machinery. If “vocal for local” is to mean anything, where are the measurable incentives for those already building sustainable economies at the grassroots?
10] I accept the tax. But where are the district-level training institutes to help craftspeople upskill or adopt new technologies? Why is support limited only to weavers with a weaver’s card, while the rest of the chain remains invisible? Why are pensions meagre, and why are spinners still earning less than MGNREGA wages?
11] Even after paying taxes, I remain excluded from institutional credit. In 2015, a “micro” enterprise under the MSME category meant a turnover of up to ₹50 lakh. In 2025, the same category stretches to ₹10 crore. This redefinition diverts benefits meant for grassroots industries to larger, often polluting ones. Isn’t it unjust that the smallest players, who actually preserve livelihoods and sustainability, are denied access to the very benefits created for them?
12] I can understand tax. But what has become of state-owned cooperatives like Priyadarshini, Boyanika, APCO, Gurjari - institutions meant to safeguard authenticity and bring the best of handloom to the common man? Who is accountable for their decline, their mismanagement, and their near invisibility today?
Every functioning society pays tax; it is what binds citizens to a shared responsibility. But the real question is, how is that tax designed, and how does it reflect the values we claim to uphold?
Asking for 0% GST on handlooms may sound appealing, but it risks oversimplifying the problem. The truth is more layered. It is not about escaping tax; it is about demanding justice in tax.
Consumers too cannot stay silent. The responsibility does not end at buying a product; it extends to questioning the framework that governs its making. Handmade isn’t costly, apathy is.
Businesses like Metaphor Racha are already taking the risks by raising these uncomfortable questions. But should the entire weight of advocacy rest on small, independent businesses?
Consumers must recognise that purchasing handmade products is not a form of charity, but a way to exercise their citizenship. Every time we allow handlooms to be taxed unfairly or overlook enforcement gaps, we become complicit in erasing an entire craft heritage.
So, let us be clear. Taxes must exist. But they must exist with conscience. If hands can weave dignity, policies must weave justice.
Handmade is not a relic of the past; it is the future waiting for fairness.
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