rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » GST rate cut: It's not win-win for all manufacturers

GST rate cut: It's not win-win for all manufacturers

July 23, 2018 16:02 IST

Fridge, washing machine, and paint makers are expected to cut prices shortly, while TV, aircon, and sanitary napkin makers are a disappointed lot

Illustration: Domonic Xavier/Rediff.com

The GST (goods and services tax) Council’s decision on Saturday to rationalise tax rates of nearly 100 items has evoked mixed reactions from companies who make these products.

 

While home appliance makers are a happy lot, since the GST on washing machines and refrigerators has been slashed from 28 per cent to 18 per cent, television (TV) and air conditioner makers are not.

TV screens up to 27 inches have seen the GST rate cut to 18 per cent (from 28 per cent), while air conditioner makers have not been given any relief at all.

“Air conditioners have not been part of this rate rationalisation, though we were hopeful it would be,” said B Thiagarajan, joint managing director, Blue Star.

“The only relief I can see as far as we are concerned is that the GST on ice cream freezers has been reduced to 18 per cent from 28 per cent,” he said.

Blue Star, for the record, is a manufacturer of chillers and freezers, which are part of its commercial refrigeration division. Air conditioners, however, remain its most popular category.

Meanwhile, TV makers are unhappy that only a part of their portfolio has seen a rate reduction, while the other half has not.

“The TV market is growing on the back of large screens. While the move to cut GST on small screens is welcome and will see TV makers pass on the benefits quickly in that segment, it would have helped if the GST on larger TV screens was also lowered,” said Eric Braganza, president, Haier Appliances India.

Even sanitary napkin makers are unhappy after falling in the exempt list after the decision of the GST Council on Saturday to slash 12 per cent GST on the item.

“This measure will not benefit the domestic industry,” said Kamal Johari, managing director, Nobel Hygiene, which makes feminine hygiene products as well as adult and baby diapers.

“We pay 18 per cent GST on inputs used for making sanitary napkins. A 12 per cent GST on finished products allowed us to avail of a set-off (against input tax), which will not be there now. This will make it unviable for us to make sanitary napkins locally, boosting imports instead,” he said.

On the other hand, paint makers said they will pass on the 10 per cent GST benefit received by virtue of coming under the 18 per cent tax slab from 28 per cent earlier.

“This was long overdue and is a huge relief,” said H M Bharuka, managing director, Kansai Nerolac. “We will cut prices once the notification comes,” he added.

The latest round is the second-largest in terms of rate cuts after November 2017, when over 170 products saw rate rationalisation.

The current round is expected to give a huge bump-up to consumption as the festive season nears. “The first half was challenging because of policy changes, rupee depreciation, and commodity inflation, resulting in price hikes and an impact on demand,” said Kamal Nandi, business head and executive vice-president, Godrej Appliances.

“The second half should be better following the latest announcement and will improve demand with price cuts that appliance makers will take after the GST rate reduction,” he added.

Sunil D’Souza, managing director, Whirlpool of India, said, “By rationalising the rates on basic appliances like refrigerators and washing machines, the government is now taking the benefits of the GST implementation to the last mile. This is a welcome step.”

Gunjan Srivastava, managing director and chief executive officer, BSH Household Appliances, said, “The rate cut will give a fillip to the home appliances market, since they are a must in every household today. These products are no longer a luxury and lower prices will help push up demand.”

Nidhi Markanday, director, Intex Technologies, said, “The rate cut on durables as well as power banks is a much-awaited move. We will rework the pricing and announce the price drop well in time prior to the festive season.”

Viveat Susan Pinto & Arnab Dutta in Mumbai / New Delhi
Source: