Proposed 28% GST a punitive blow to Kashmiri handmade shawls

Srinagar, Dec 18: The delicate threads of Kashmir’s centuries-old textile tradition now hang precariously in the balance, threatened by a potential fiscal policy that could unravel the very fabric of its renowned handicraft industry.

A proposed GST hike from 12 to 28 percent on Kashmir shawls valued over Rs 10,000 will cast a long, chilling shadow over the artisans and dealers who have meticulously preserved this exquisite craft through generations.

The Group of Ministers (GoM) on Rate Rationalisation, led by Deputy Chief Minister of Bihar Samrat Chaudhary, has recommended a dramatic GST rate escalation that would raise taxes on Kashmiri shawls, crewel items, and other textile products from the current 12 percent to 28 percent for items priced above Rs 10,000.

Instead of helping Kashmiri shawls grow while riding the wave of sustainability across the world, the GST Council Group of Ministers has proposed increasing the tax.

The GST on Kashmiri shawls and crewel items above Rs 10,000 is recommended to be increased from the current median rate of 12 percent to the slab of 28 percent.

This proposal is set for discussion at the 55th GST Council meeting on December 21 in Jaisalmer.

Former Finance Minister, Haseeb Drabu said: “Even though GST is not a tax on the producers but on the consumers, the proposal to hike it to 28 percent is patently against the basic principles of GST and its architecture. The rate band of 28 percent, the highest band, is a punitive rate meant to reduce the consumption of what are called “demerit” goods. Indeed, a subset within the rate band is the “sin goods” category like cigarettes, for instance. By taxing Kashmiri shawls at 28 percent, the integrity of the GST rate regime is being impaired.”

He said that the Kashmiri shawl seems to have been put in this bucket on the spurious notion that a Kashmiri shawl above Rs 10,000 is a luxury good and hence to be taxed at the highest punitive rate to reduce the consumption in this category.

“But that is a flawed understanding. The luxury goods in this category, like BMW cars or other luxe items, are the ones with high import content.  As such, bracketing shawls with luxury and sin goods is patently absurd,” he said.

Kashmir Chamber of Commerce and Industry (KCCI) President Javid Ahmad Tenga said, “The implications of this proposed hike are deeply concerning as the Kashmiri shawl is not a luxury item. This sector provides direct and indirect employment to over 3 lakh artisans, with many of them being women and individuals from marginalised communities as shawl making is a highly labour-oriented process.”

He said that the handicraft sector, particularly the renowned Pashmina industry, represents a delicate ecosystem where each product embodies months of meticulous handwork.

“Artisans invest extensive manual skills and time to create unique, handmade items that generate over 75 percent of their value through labour-intensive processes,” Tenga said. “Dealers in the sector are particularly concerned about the tax implications when supplying products from Kashmir to national markets. The transition from Value Added Tax (VAT) to GST has already complicated their economic landscape, creating substantial financial burdens, especially given the unpredictable nature of handicraft sales where items might remain unsold for months or even years.”

Tenga said that the proposed tax structure effectively threatens to erode the capital of small and medium enterprises, creating a precarious economic environment that could permanently destabilise Kashmir’s artisanal ecosystem.

He said that each percentage point of tax increase represents not just a financial challenge, but a potential blow to a centuries-old tradition of craftsmanship.

In a compelling letter addressed to the Commissioner Secretary of Industries and Commerce, the Directorate of Handicraft emphasised the critical nature of the proposed tax change.

“Pashmina industry is an iconic part of Jammu and Kashmir’s heritage, characterised by its delicate craftsmanship and labour-intensive processes,” the letter stated. “Each piece of Pashmina represents months of meticulous hand weaving by skilled artisans, many of whom are women in rural and remote areas.”

The letter further warned: “The proposed hike in GST from 12 percent to 28 percent for Pashmina products priced above Rs 10,000 threatens the survival of this fragile industry. If implemented, this would not only jeopardise the livelihoods of artisans but also erode a vital aspect of Jammu and Kashmir’s cultural heritage.”

The KCCI President voiced strong opposition to the proposed changes.

“We will take up this issue at all forums,” Tenga said. “It will be catastrophic for handicrafts.”

The proposed tax structure threatens an industry that provides critical livelihoods to over 2.50 lakh artisans, with a significant proportion being women from rural and marginalised communities who have inherited generational skills of intricate craftsmanship.