‘This move will impact rural employment adversely’

Bengaluru, May 24, 2017: The All India Agarbathi Manufacturers’ Association (AIAMA) has expressed its displeasure over the recently-proposed GST rate of 12% on agarbathies. The high rate on the basic home prayer product is not only expected to affect the common people, but also impact the livelihoods of thousands of people involved in the rolling of agarbathies. AIAMA, an organisation that works for the development of the agarbathi industry, has appealed to the Finance Minister of India to revise the rates considering its adverse consequences on the consumption of the product and employment.

AIAMA 1 low resIn most states, the VAT and Excise on agarbathies is currently 0% as it’s a cottage and village industry, and same was expected from GST which is scheduled to be implemented from July 1. Agarbathi is a product that is used for prayer at home and religious places by the common man. Hence, the 12% GST rate is inconceivable. While other pooja samagri including havan samagri is under 0% GST, agarbathi is categorised under 12% slab. Also, the industry is labour-intensive, therefore, if the sector cannot be completely exempted from the GST, AIAMA has asked for the minimum rate of 5% at the most, for the betterment and growth of the industry.

As per the commitment of the GST Council, GST will subsume excise duty and VAT which has happened for most of the products but for Agarbathi where the sum of Excise; VAT is close to Zero, GST is 12%. A GST of 12% would lead to a heavy cost escalation resulting in substantial decrease in usage of Agarbathi.

Speaking on the proposed GST rate, Sarath Babu, President of AIAMA, said, “The 12% GST rate proposal on agarbathi will affect the industry gravely. Agarbathi is used everyday for prayer by the common man and he will be impacted by the high tax rate as the prices will go up. Most of the agarbathi manufacturers are cottage and village units, and will be hit hard. Many jobs and livelihoods of women will be under threat. The current government is looking at job creation, and such a move will only be counter-productive.”

He added: “Agarbathi is currently at 0% Excise and 0% VAT in most states and the industry was expected to be included in the nil GST rate or at least the 5% GST rate. We will now have to plead with the Finance Ministry.”

Most of the agarbathi manufacturers in the country follow a cottage industry model that generates innumerable employment in rural areas across the nation. The model not only facilitates micro-entrepreneurship in the villages, but also generates employment for women in such areas, making the women self-sufficient and independent.

The industry has been able to offer a solution to unemployment in many of the backward areas, a problem which even the Government has been grappling with for a longtime. It has also been able to curb migration from the rural areas to urban centres on a very large scale.