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Regulation of GST on consumer durables – a need of the hour

There is a need to lower the taxes so manufacturers can pass on the benefits to the buyers

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The implementation of the Goods and Services Tax by the Indian government has been one of the most transformational legislations in the history of the country’s economy. Publicised as the “one nation one tax”, it completely replaced the multi-tax structure previously prevalent in India, helping enhance transparency and streamline the taxing system, significantly. In addition, it also helped bring about improved free flow of credits, a decrease in the prices of goods and services, and facilitate barrier-free movement of goods across the country. However, for the consumer durable industry, especially consumer electronics, several challenges still remain, which the GST council must address at the earliest.

During the initial stages of implementation, almost all major consumer electronics were categorised under the 28 per cent GST rate, including ACs, refrigerators, TVs, and washing machines, to name a few. However, industry representation and growing consumption patterns soon led to the GST Council rationalising the tax rate on several consumer electronics products, including refrigerators and washing machines. Eventually, the number of goods categorised under the 28 per cent tax bracket fell from over 200 products to close to only 35 goods.

Following the initial announcement, the rates were further revised by the Council, and currently, TV sets with a screen size of over 32 inches are subject to 28 per cent GST, while those with a screen size of 32 inches and below, are subject to 18 per cent GST.

Before the announcement of the Union Budget 2019-20, the industry had been hopeful that the GST rate on appliances like large-screen televisions, air-conditioners, and refrigerators, would be lowered to 12 per cent by the Government. However, this urgent need still remains to be addressed, especially in light of the fact that these products are today considered household necessities, and no longer fall under the category of luxury goods.

There is, thus, an alarming need for demand in the consumer appliances sector to be enhanced significantly, and the lowering of taxes will play a key role in the same, as manufacturers would be able to pass on the benefits to the buyers. Hence, the lowering of GST rates for TVs above 32 inches, to 18 per cent, will not only help boost the industry, but also benefit the end-consumers, as well.

Furthermore, the lowering of GST rates and exemption of import duty on open cell television panels can also help boost sales. According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), manufacturers are stating that the fall in demand is because of low consumer sentiments, since the sales of other home appliances like washing machines and refrigerators have also experienced flat growth in the month of July.

The industry expects significant upkeep during the ongoing festive season sales, which started on August 15, but continues to be wary of the impact of the adverse situations in the country, especially like the floods, on the industry. In adherence to the global standards, the Indian GST Council should now look at further rationalising the rate of tax on such products, to help boost their consumption and penetration in the Indian market.

(The author is Director, Westway Electronics. The views expressed are his own and Indiantelevision.com may not subscribe to them.)

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