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The high Goods and Services Tax (GST) rate is a major setback to the domestic industry, the Indian Electrical and Electronics Manufacturers Association (IEEMA), said.
Seeks reclassificationThe current tax incidence on electrical wires and cables is 28 per cent. IEEMA has sought a reclassification under 18 per cent, the asscociation said in a statement.
According to the industry, the rate of 28 per cent is “very high compared to previous tax incidence of about 14 per cent”, adding that it had made a representation to the government and the GST Council regarding the tax rates on electrical wires and cables.
There is also a case of stranded input credit for the industry. “Since both public and private power utilities and the end users, constituting approximately 70 per cent of the usage of electrical wire and cables manufactured in a year do not get any input tax credit, the cost of transmission and distribution of power increases and sets an inflationary trend in the economy,” the statement said, adding that this had led to an increase in the working capital requirement.
“Almost all the raw materials used for manufacturing electrical wires and cables are taxed at 18 per cent under the GST regime. Hence, this huge gap between the rate of tax applicable on inputs and outputs is resulting in an effective increase of 14 per cent in working capital requirement by the manufacturers.”
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