The handicraft industry in India has raised concerns over the imposition of 25% tariff by the United States along with an additional 25% tariff linked to the country’s purchase of Russian oil, even as the 56th meeting of the Goods and Services Tax (GST) Council was held here under the chairmanship of Finance Minister Nirmala Sitharaman on Wednesday.
The sector is also burdened by varying GST rates on different products such as carpets and bamboo items. Industry stakeholders are demanding a uniform GST rate across all handicraft products to remain competitive, especially in the face of rising tariffs and stiff competition from China.
While the Council is reviewing proposed rate cuts on more than 150 items, the handicraft sector has raised urgent concerns. Already reeling under a 25% tariff imposed by the United States, compounded by an additional 25% levy linked to India’s purchase of Russian oil,the sector also faces the burden of varying GST slabs on products like carpets and bamboo goods. Stakeholders argue that a uniform GST rate across handicrafts is critical for survival amid escalating tariffs and intensifying competition from China.
Without government support, the industry fears large-scale job losses, layoffs, and a gradual erosion of its traditional sheen and global market share.
Dileep Baid, former chairman of the Export Promotion Council for Handicrafts, said, “We want a uniform GST of 5% on all handicrafts as the entire handicraft industry is in ICU due to US tariffs and competition from China.”
He stressed that, given the geopolitical situation, there is an “urgent need to develop an India-focused market” for handicrafts. Baid added, “If the government reduces GST, the industry can be saved, along with the jobs of thousands of people. The sector is on the verge of collapse. The handicrafts industry has also lost the capacity to repay loans, and the Centre should provide a loan moratorium.”
Currently, raw bamboo (plaiting materials) has 5% GST, while basic bamboo crafts (basketwork) fall under the 12% GST slab.
Baid warned, “The impact of US tariffs is grave on our industry, as shipments are being cancelled. The number of containers dispatched has significantly declined, and the immediate effect is going to be on jobs, especially in the handicrafts sector.”
Rajasthan, the second-largest exporter of handicrafts after Uttar Pradesh, employs about 7 lakh people in the sector.
Meanwhile, the GST Council is likely to make a final decision on the Centre’s proposal to reduce GST rates on over 150 items as part of a comprehensive rate adjustment.
The Centre has proposed rate rationalisation under GST for the first time, introducing a two-slab system: 5% for essential items, 18% standard rate, and 40% for sin goods like pan masala, tobacco, and cigarettes. This proposal was discussed during the Group of Ministers (GoM) meeting in Delhi on August 20-21 and will now be considered by the GST Council on September 3-4.
In the pharmaceutical sector, companies have demanded that medical insurance for employees be exempt from GST, which currently stands at 18% with no credit allowed. API (Active Pharmaceutical Ingredient) manufacturers also seek measures to make the industry more competitive.
R K Agrawal, National President, Bulk Drug Manufacturers Association of India, said, “Discretion on availing credit on many items used in manufacturing should be fully clarified. The negative list for availing credit should be removed, and all GST paid on inputs should be allowed as credit. Due to the negative list and discretionary powers, a lot of credit is disallowed, which increases costs and makes products uncompetitive in the global market.”
He further suggested that a simplified mechanism be implemented for duty refunds on export dispatches and that GST paid on cleanroom requirements, such as AHUs, doors, partition panels, epoxy floor coatings, electrical fittings, and installation charges, be allowed as credit without officer discretion.
Pharmaceutical wholesalers have also urged the government to provide auto refunds of excess unutilised credit on a quarterly basis.
The demand by industries have come up when the Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising ministers from all states, is discussing the Centre’s ‘next-gen’ GST reform proposal of having just two tax rates of 5 and 18%.
The textile industry, which ranges from traditional handlooms to capital-intensive mills, has also called for uniform GST.
Shaleen Toshniwal, Managing Director, Banswara Syntex ltd. Chairman – Matexil ( man made and technical textile export promotion and council), said, “A 5% GST slab should apply across fibre, yarn, fabric, and readymade garments.” He emphasized that the textile sector, a major employment generator and the second-largest in the country, needs government support to remain competitive.
He added, “To boost textile trade, a higher RoSCTL (Rebate of State and Central Taxes and Levies) rate is needed, reducing production costs and allowing Indian textile and apparel exporters to offer more competitive prices globally.”
Sudarshan Jain, Secretary General of the Indian Pharmaceutical Alliance, welcomed the Centre’s initiative to discuss “next-gen” GST reforms, with just two tax rates of 5% and 18%. He said, “The Prime Minister’s call for next-generation GST reforms is vital to stimulate growth. Placing medicines in the 5% slab will be important to ensure affordability and address public health concerns. The pharma industry also proposes aligning GST on APIs, KSMs, and key inputs to 5% to avoid tax inversion.”
Amit Gupta, president of Honey exporters Association of India and Director of Indocan honey, said, ” To promote honey consumption in India, the government should eliminate the current GST of 5% on conventional honey while reducing the prevailing 18% GST on valve added honey to 5%.”