GST impact: HP reassessing plan to set up manufacturing facility in India

HP Inc. India is re-evaluating its earlier proposal to set up another manufacturing facility in India after the Goods and Services Tax rollout.

Sumeer Chandra, Managing Director of HP Inc. India, told BusinessLine that “In light of GST coming in now, we are again reassessing our manufacturing model. A study is underway right now, we have not taken a final decision as yet.”

In September 2015, US-based HP Inc. had expressed the desire to set up a second manufacturing facility in India. The facility was to be dedicated solely for printer manufacturing and seen as a commitment to Prime Minister, Narendra Modi’s ‘Make in India’ call.

Chandra said, “There are some tax changes that have happened. We have seen a tax change in our printing category. So, we are now relooking at our proposal.”

In July, HP Inc. India had hiked the prices of its multifunction printers (MFPs) and cartridges. While publishing the revised post – GST price list in newspaper advertisements, HP India said that retail price of ink cartridges has been hiked by 12-15 per cent while that of MFPs by 8-10 per cent. After GST rollout, MFPs were taxed at 28 per cent compared to 18 per cent earlier while ink cartridges were also in the 28 per cent GST slab compared to 15-18 percent previously. There was no change in effective tax incidence on desktops, notebooks and single-function printers. This would boost the prospects of the company’s existing manufacturing facility in Pantnagar, Uttrakhand.

Chandra said, “We already have a manufacturing unit and it still has capacity expansion opportunities. The India factory is producing most of our commercial desktops. We are market leaders with almost a third of the PC market.”

In the current manufacturing facility, local sourcing by HP Inc. India varies from 50 per cent to 80 per cent depending on the type of device according to company officials. Higher end devices have a lower local sourcing component.

Asked whether technology companies will be able to increase local sourcing, Chandra said, “At some point of time, there could be a case to be made about a favourable tax regime if equipment is locally manufactured. So, we want to look at that and if that’s something the government is supportive of then that will create an incentive for us to manufacture locally.”

A tax rebate through an input tax credit that could help offset some of the higher taxes on the end product will be a favourable incentive for increasing local sourcing, according to Chandra. But, HP Inc India is going strong in the printer business with close to 47 per cent share of the printer market, the company continues to be a market leader.

He said, “Our growth strategy is focussed on new areas like A3 printing. HP has historically been the market leader in A 4 printing. We have now established some room in A3, but we have significant room for growth there…In the future we have new products that we are likely to bring in, one of them being the 3D printer.”

“We launched 3D printing a year and a half back and we just started shipping our first printer in Asia last quarter. We will bring this product to India in a short while… It’s going to be towards the end of this calendar year or early next year.”

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