Consumer appliance makers are seeking a cut in this year's Budget on products like refrigerators, television parts, washing machines and air-conditioners to enable a boost to the industry.
In September 2018, the government doubled the basic customs duty on air conditioners, washing machines (up to 10 kg) and refrigerators to 20 percent, making them 5-8 percent costlier. This had offset the goods and services tax (GST) benefit of 10 percent that was provided when tax on televisions (upto 27 inches) refrigerators, food processors and washing machines was cut to 18 percent.
Later, the GST on televisions upto 32 inches wide was cut to 18 percent from 28 percent in December 2018. However, products like air-conditioners and large-screen televisions are still taxed at the highest GST rate of 28 percent.
Vijay Mansukhani, MD, Mirc Electronics said, “We look forward to the custom duty to be made zero percent on raw materials. The current rates are very high and is not favouring the ‘Make in India’ campaign.”
While this may not be agenda in the budget, which is to be presented on July 5 by Nirmala Sitharaman, Mansukhani said that the labour laws should be changed and be made friendlier for manufacturers.
The government has stated in the past that it will incentivise local manufacturing (Make in India) and disincentivise imports from other markets. However, a majority of the raw materials for white goods are imported from abroad.
Pricing of the product is the biggest determinant for white goods sales in India. A raise in taxes and basic duties on products impacts the final cost of the finished product.
Free trade agreement is one of the biggest worry for consumer durables goods category this has to be cancelled or else it can be selective to import of agricultural produce etc. Otherwise manufacturing in India will not be very encouraging.
Avneet Singh Marwah, CEO – SPPL (exclusive brand licensee of Thomson TVs in India) said that the duty on OC (used for TV panels) should be made nil. As there are no panel manufacturers in India, this will really boast the Make in India initiative.
All consumer durables companies have also sought a reduction in the rate of GST to 18 percent. Although tax-tweak decisions are taken in the GST Council meeting, it is anticipated that the finance minister will touch upon the GST revenue path during her budget speech.
Incentives for the manufacturing sector will lead to a boost for the production and assembly lines of these products.
Gurmeet Singh, Chairman & Managing Director, Johnson Controls-Hitachi Air Conditioning India said that the interim budget did address the middle-class housing needs and the farming community expected to have a trickle-down effect for the AC industry.
“The AC industry is looking forward to the continuation of steps taken for the indigenization of the industry with a focus on domestic manufacturing, creating better employment opportunities and rural growth,” he added.
Apart from this, Singh said that the government should also strengthen the MSME sector since they play a role in their sales, logistics, services, and vendor network.