GST’s impact on the beedi industry – seeking a balanced approach

Preserving livelihoods and empowering workers through a fair tax solution for India's beedi industry.

New Delhi [India]: The Goods and Services Tax (GST) has deeply impacted the traditional beedi industry, a cornerstone of rural livelihoods in India. Classified under the highest tax slab of 28% since GST’s implementation in 2017, beedis now face significant cost pressures, disrupting a sector that sustains over four million workers, most of whom are women in economically vulnerable regions.

This high tax rate has strained small-scale manufacturers, increased production costs, and led to reduced earnings for workers, many of whom rely on piece-rate wages. To counter these challenges, a recalibrated GST approach is vital. Proposals include introducing a tiered tax structure to support small producers, tax exemptions for rural beedi-making zones, and targeted subsidies for exporters to enhance global competitiveness.

Such measures would not only preserve this labour-intensive industry but also honour its cultural legacy and ensure fair wages for workers, many of whom depend on beedi-making as their sole source of income. Balancing revenue needs with social equity is crucial for sustaining the industry and protecting the livelihoods it supports.

For the predominantly female workforce, the consequences have been severe. Most women in the beedi industry work on a piece-rate basis, earning wages directly linked to their production. As manufacturers grapple with rising costs, many have reduced payouts to workers, leaving families in economically disadvantaged areas struggling to sustain themselves.

“Higher production costs have made it harder for us to make ends meet,” shared a worker from West Bengal. The lack of alternative employment opportunities in rural areas exacerbates this situation, making the beedi industry an irreplaceable source of income for many families.

To alleviate these challenges, industry stakeholders propose reducing the GST rate on beedis. A lower tax rate would reduce production costs, ensuring affordability for consumers and fair compensation for workers. Additionally, a tiered GST system could provide relief to small-scale producers, enabling them to compete effectively in a challenging market.

Designating rural areas as GST-free zones for traditional industries could further bolster the sector, preserving jobs and supporting local economies. Export subsidies for beedis could enhance their competitiveness in global markets, creating new opportunities for growth.

The beedi industry’s challenges highlight the need for a balanced approach to taxation. Reducing GST rates and offering targeted incentives could help safeguard the livelihoods of millions while preserving a traditional industry that remains vital to India’s rural economy.

By addressing the economic strain caused by GST, policymakers have an opportunity to ensure the long-term sustainability of the beedi industry, empowering its workers and protecting an integral part of India’s cultural heritage.

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