- Although electronic appliances are now common in every household it is still treated as a luxury item by the government and GST council.
To boost growth and meet the escalating demand of sustainable consumer electronics appliances such as refrigerators and air conditioners, the electronics industry and manufacturers have now suggested a lower GST tax slab in the upcoming budget. Amid the COVID-19 strain, the government is very keen to provide new initiatives and incentives for the electronics appliance manufacturers that were badly impacted in the past seven to eight months. Apart from lowering the GST rate, the industry has put forward several other recommendations ahead of the budget 2021 such as removing custom duty on raw materials on electronic items, lowering other tax rates, offering more incentives to homegrown manufacturers rather than FDI.
Speaking about lowering the GST tax slab at the budget session, Pankaj Mohindroo, chairman of India Cellular & Electronics Association, said exclusively to The Electronics, “The recommendations need to go through the GST council of India. The budget cannot accept this proposal. The industry has recommended this because as of now, the GST is too high and it is to rationalize to 18 percent, which will ultimately drive sales and more adoption of electronics appliances.”
At this critical situation, the government is expected to undertake imperative steps such as decreasing input cost to boost components manufacturing by further lessening custom duty on imported items. Currently, the basic customs duty on items used in the manufacturing of components ranges from 7.5-10 percent, which needs to be reduced.
Earlier, the state government had imposed a VAT of 11-12.5 percent on wide electronic goods and on the other hand, it was also imposed with an excise duty of 12.5 percent. Therefore, the average tax rate inclusive of CST and local taxes rounded up to 25 percent to 26 percent. Now, GST has removed this tax separation.
Now, the budget of 2020-21 has augmented the GST rate on certain electronic products. For an instance, GST on mobile phones is now 18 percent, which was earlier 15 percent. Although electronic appliances are now common in every household, it is still treated as a luxury items by the government and GST council, which is why leading manufacturers such as Bajaj, Godrej, Voltas, and Samsung are not being able to offer GST benefit to customers. For an e.g., manufacturers based in Mumbai availed benefits under GST as they were paying Octroi (local tax) at 5% post other taxes on household electronics appliances.
Electronics industry associations think that due to inflation and escalation of taxes, there is a price increase of basic consumer appliances such as ACs, vacuum cleaners, refrigerators, and televisions, which ultimately impacts sales and reduces the demand of goods.
Highlighting the impact of GST on electronic appliances, Ashis Kumar Bose, senior joint commissioner, Directorate of Commercial Taxes, West Bengal, said exclusively to The Electronics, “GST has been calculated by the GST council very carefully depending upon the requirement of the items. It is not only electronic appliances, but every luxury items have GST of 28 percent and not below 18 percent. Previously, the companies had to give a minimum of 5 percent excise duty on manufacturing goods and then they had to pay a sales tax also. Hence, when GST was unleashed the rate was fixed upon every item. Government has no hand in reducing or reducing GST rates upon recommendations as it has to be decided particularly by the GST council.
“Electronic items these days are common in every household, but it is nowhere a necessity items like medicine and groceries where you can have low margin taxes. It cannot hamper electronics business and sales because GST is not liable to import and export. A person who buys an iPhone at Rs 50,000 can also pay a GST of 28 percent, which will ultimately generate more revenue to the country,” added Bose.
Research association tecARC mentioned that there is no harm in 28 percent of GST on wide-electronic goods and it is completely fine if all of them are not under 18 percent tax slab. The industry has already got a lot of benefits such as incentives and packages from the government. When the government offers such things it also has the full right to earn when the industry is growing.
Faisal Kawoosa, founder, techARC said to The Electronics, “Government also has to generate resources. Electronics is not a new domain for us and has been for many years. The point is even if they are now asking for SOPs what they were doing all these years. In any manufacturing, there are economies of scale, which they should have now. Even, if you want to make smartphones necessary items the only feature phone and entry-level smartphones are liable and not the premium one because basic criteria remain the same.”