With GST rate cut kicking in today, white goods set to become cheaper

Meenakshi Verma Ambwani Shishir Sinha New Delhi | Updated on July 26, 2018 Published on July 26, 2018

Status quo Dealer and retailer margins are not likely to be affected by the change   -  S_R_Raghunathan

Buyers of smaller TVs, refrigerators, washing machines set to benefit

Washing machines, refrigerators and smaller-size TVs are set to get cheaper from Friday, while one may end up paying more for larger flat panel sets from next month.

After the GST Council decision of July 21 to reduce rates on white goods and electronic products, consumer durable companies have said they will pass on the complete benefits to consumers. The new tax rates will be effective from July 27.

With several companies, especially FMCG players, under the scanner of the Anti-Profiteering Authority, the consumer durables industry will ensure that it does not err and pass on these benefits of reduced tax rates to the buyers.

With the festival season set to kickstart in August, the GST rate revision comes at an apt time for appliance makers which are facing macro-economic challenges of higher commodity prices and weak rupee. Some of these companies had to increase prices by 2-3 per cent in June and that had impacted demand.

But challenges will remain for LED TV makers, especially players that are now increasingly focused on larger-sized LED TVs, that will continue to be taxed at 28 per cent. Increase in global panel prices and currency fluctuations have adversely impacted their costs. These companies are expected to increase prices of larger-sized TVs of 32 inches and above in August due to these factors, said a senior executive with a consumer durable firm.

Input tax credit

Unaffected by the rate change will be the dealers and retailers’ margins, as they will be able to claim Input Tax Credit at 28 per cent for older inventory. Last year, the consumer durable industry had faced disruptions as retailers and distributors decided to de-stock older inventory at massive discounts just before the implementation of GST from July 1.

Kamal Nandi, Business Head & EVP, Godrej Appliances, said, “We don’t expect de-stocking again as dealers can claim Input Tax Credit at 28 per cent for old stock procured prior to the transition date, therefore their margins are not impacted due to reduction in MRP and market operating price. We will be passing the benefits to consumers from immediate effect.”

Anita Rastogi, Partner (Indirect Taxes) with PwC, explained that purchase at 28 per cent by the traders which will be sold at 18 per cent GST would result in excess input tax credit and this pool of credits can be utilised for payment of tax for next 12 months by the trader. “Another aspect which would need attention is the anti-profiteering provisions which would require the trader to reduce the prices,” she added.

Manish Sharma, President & CEO, Panasonic India and South Asia, said the company plans to pass on the complete benefits translating to around 7- 8 per cent to the consumers.

Post GST revision, the refrigerator segment is expected to grow by more than 15 per cent and washing machine categoryby 18-20 per cent in FY19. In a statement, Vijay Babu, Business Head-Refrigerators, LG India, said, “We will pass on 100 per cent GST reduction benefit to the customers with effect from July 27 on washing machines, refrigerators and vacuum cleaners.”

Eric Braganza, President, Haier Appliances India, added, “We are passing on the benefits to consumers and we will communicate the new price list to the dealers.”

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Published on July 26, 2018
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