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Plastic furniture to cost a bomb post GST
Plastic furniture predominantly used by poor and common people is set to cost a bomb post the implementation of the Goods and Service Tax (GST) from July 1 as the prices are projected to go up by a minimum of 12 per cent.
Prices to go up by 12%, hitting the common man hard
Hyderabad: Plastic furniture predominantly used by poor and common people is set to cost a bomb post the implementation of the Goods and Service Tax (GST) from July 1 as the prices are projected to go up by a minimum of 12 per cent.
At present, plastic furniture products attract a value added tax (VAT) of 12.5 per cent and the central excise duty of five per cent, taking the cumulative taxation on them to 17.5 per cent.
But under GST, these products are levied with 28 per cent tax, a straight 10.5 per cent increase in the tax burden.
Given the extra costs due to monthly filings and other procedural issues, the overall additional financial burden on the account of GST is estimated to be around 12 per cent.
The extra tax burden on small scale industries is far higher at 23 per cent as they are currently exempted from the VAT in Andhra Pradesh and Telangana and so only pay the central excise duty of five per cent.
As most of the companies that manufacture these products fall under the small scale category, the impact of the tax hike is likely to be far wider.
“It is the poor that use plastic furniture as they can’t afford wooden and other kinds of furniture which are obviously expensive.
Poor people use them because they are cheaper. We sell a plastic chair for around Rs 120 and that shows how affordable the plastic furniture is. Unfortunately, the central government has slotted these products under the luxury category of 28 per cent tax,” K Somasekhara Reddy, Managing Partner of Hyd-based Sree Industries, and Treasurer, AP & TS Chapter, All India Plastic Moulded Furniture Manufacturers Association, told The Hans India.
Finding fault with the government’s move to club plastic furniture with luxury items, Reddy said people in rural areas use the products extensively.
“In addition to furniture, rural people also use plastic vessels for water. Such vessels are priced at Rs 30 or so. How can we expect poor people in rural areas to pay 28 per cent on such vessels?” he asked.
As per industry estimates, there are over 40 plastic furniture manufacturing units in Telangana and nearly 15 in Andhra Pradesh, which cumulatively employ 2,000 people. Over 90 of these units fall under the small scale sector.
The size of the market in AP and TS for these products is pegged between Rs 1,200 crore and Rs 1,800 crore a year.
Terming the 28 per cent GST on the products as unfair, Sushil Aggarwal, the association’s General Secretary, said:
“Before finalising the GST rates, the government has informed us that the tax implication will only be on the value additions and will be revenue neutral.
However, our raw material is taxed at 18 per cent and we have to pay an additional 10 per cent tax due to mismatch in input and output tax”.
Fearing significant drop in sales due to tax hike, he said the high tax will deprive poor people of basic furniture.
