Consumer durable makers press for import duty hike after GST rate cut

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The government has said it is considering the possibility of hiking import duty on consumer durables, following a slash in the goods and services tax (GST) rate last week. An appeal for an import duty hike has come mainly from organised television manufacturers, who argue that grey market operators import TV sets, passing it off as parts, and thereby taking advantage of lower customs duty on it.

The matter assumes significance since GST on TV sets, up to a screen size of 68 cm (or 26 inches), has been slashed from 28 per cent to 18 per cent in the last round of review.

Established TV brands, through industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA), has pressed the government to extend the GST rate cut on television sets of up to 142 cm (or 43 inches), stressing this will give them a pricing advantage.

"The 26-inch TV segment is not more than 8-10 per cent of the overall TV market. Whereas the 32 to 43-inch TV segment constitutes almost two-thirds of the overall TV market and is critical for most players,” says Rohit Kumar Singh, spokesperson, CEAMA. 

“Most middle-income homes in India have TVs in the 32 to 43-inch bracket and significant number of launches and innovations happen in this segment," he says.

Grey market operators, Singh maintains, can take advantage of the current dual GST rate structure, since TVs above 68 cm continue to be taxed at 28 per cent. 

While GST on smaller TVs is at 18 per cent in addition to the customs duty on most TV parts (for all screen sizes) in the 5-10 per cent bracket. "There is a clear pricing advantage, which could further fuel grey market imports," he says. 

Some of the key components going into TV sets include open cells, display panels and plastic units, which are all imported. TV manufacturers argue that open cells for smaller TVs (up to 68 cm) are no longer available abroad, so importing and assembling it in the country is a disadvantage. 

“What is the point then of slashing GST on TVs up to a screen size of 26 inches, when most of us don't even make it," says the chief executive of a top electronic goods maker, who declined to be quoted. 

"It makes greater sense instead to slash GST on TVs that are actually assembled in the country and give local manufacturers a pricing advantage," he adds.

Refrigerator and washing machine manufacturers such as Godrej Appliances have already slashed GST on their products, following the government’s decision to reduce the GST rate by 10 per cent. Kamal Nandi, business head and executive vice-president, Godrej Appliances, said it had reduced prices (by 10 per cent) in microwave ovens and chest freezers, in addition to refrigerators and washing machines. 

"The GST was slashed on all these categories. And since our portfolio includes these products, the GST benefit has been passed to consumers," he adds. 

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