Indore: Quelling qualms: 10% price cut of electric items on anvil

Indore: Goods and Service Tax (GST), which was earlier considered to be a spine-breaking one, will now help subdue the pain following reduction of tax rates on electrical goods with prices of items like fan, heater, submersible pumps, stitches and cables are likely to witness a cut by about 10 per cent within next a week. The cut is expected to help bringing back the luminary in electrical goods market.

The GST Council, in its crucial 23rd meeting concluded on November 10 has decided to put the important electrical items including wires and cables, switches and switch gears under slab of 18% from earlier 28%. The decision has sparked a wave of cheers in electrical items market. The higher rate of GST attributed a reason of registering lesser sale of electrical items in last Diwali.

Experts of electrical items trade informed that in pre-GST era 12.2% central excise, 5% VAT and 1% entry tax was charged. In all there was 18% tax load on the items. But, in the new indirect tax regime implemented from July 1, all the items had been put at highest rate bracket of 28%. This higher rate very adversely affected small and unorganised manufacturers.

They explained “In pre GST era small manufactures mean the ones with turnover less than Rs 1.5 crore were out of liability of the central excise. They had to pay just VAT and entry tax. But, in post-GST era, these manufacturers directly fell under 28% category as the condition of accepting the composition scheme was Rs 1 crore turnover where GST rate was a meagre 1 per cent.”

However, traders and manufacturers though had nothing to do with the increase or decrease of rates, they got badly hit as customers started cutting down in purchase, indirectly affecting the both. PRO of Indore Electrical Merchants Association, Prakash Gupta said that “Now, manufacturing companies has to pass on the benefit of GST rate cut to customers.”

He noted that in total trade of wire and cables 25% is being consumed by industries, 35% in homes and real estate projects and 40% by agriculture sector. As far as switch gears (MCB, RCCB) are concerned, which does not yield input tax credit (ITC), 75% are used in industries and 25% in house hold.

Owing to higher rates of GST and thus higher prices of electrical goods, traders hardly had much demand of stocks during Diwali. Thus, manufacturer had also decreased the production. Due to these reasons the Diwali did not yield much business for the stakeholders.