The GST Benefits for Consumer Durable Industry

28-08-2017 Saurabh Kabra

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The GST Benefits for Consumer Durable Industry

The previous tax structure was deeply engaged with complexities in the method of payment, a myriad of direct and indirect taxes and perplexing compliance requirements. The new GST regime will rid the taxation system of these ambiguities. The new taxation regime also fuels the promise of ‘One Nation, One Tax’. Under this singular tax, as many as 17 indirect central and state tax levies have been subsumed, thus ending years of complication and tax cascade. Thronging the nation with its digitalized approach, every sector of the economy will benefit from its implementation.

The consumer durable industry majorly stands by the new GST regime as it eliminates the problem of multiple taxation. With a revised cost structure, this industry will be one of the most positively impacted sectors. This will simplify the taxation for the end consumer and will attract more buyers that will boost the sales of consumer durables like TVs, ACs, refrigerators, etc.

In a bid to ease the muddled up taxes and scores of additional taxation at various points of the journey of goods from production to the consumer, one of the hindrances involved was in inter-state transportation of goods which will be now be resolved. In the past, in the event of a vehicle crossing a state border, a CST tax was levied and contributed to the added expense and the delay due to queuing of vehicles. Since CST has been subsumed in GST, companies will no longer be required to have depots/warehouses in close proximity of their different markets. Most of the times, these warehouses were forced to operate below their capacity thus increasing their operating costs. With the absence of these warehouses, it is estimated to see almost a 10-15 % dip in cost for logistics, the benefit of which will be reflected onto the costs of consumer durables. Thus, as GST replaces the central sales tax on inter-state sale of goods and several other levies, costs for manufacturers will notice a relative slash. This will help companies channelize their investments better and also enhance their business.

Each state is bound by its own set of taxation policies and rules of governance. This fragmentation accounts for about 20-30% of the price. A law promising a common market will mean an end to the wide variance in prices for the same product across the country. The consumer durables sector happens to be an inventory-heavy sector. With the advent of GST, uniformity in tax rates will be widespread. This will ease the pressure faced by this industry.

Consumer durables are placed under the 28% tax slab. Though it is the highest tax slab, we also need to keep in mind that a majority of goods were previously taxed at 26-31 per cent rate, depending on their nature and usage. However, one thing that companies may have to watch out for is whether excise duty exemption zones continue to get that benefit.

Implementing GST fully will be a challenge in the beginning both for the industry and the government due to a lack of infrastructure. The workplace scenario in India mainly operates on a manual basis. The shift to a digital method requires time and practice. Hence the Government should consider relaxing penal provisions for a couple of quarters to help it comply with the new tax regime. Nonetheless, in the long run, benefits of GST will far outweigh all the temporary inconveniences and bring us on par with the best taxation regimes in the world.

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Saurabh Kabra

The author is Director, Business Operations India, Truvison which is a Europe based consumer electronics & appliances company. The company entered Indian Market...

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