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Exclusive: Get ready for a GST scorcher this summer, Council unlikely to cut rates on ACs, refrigerators

M Saraswathy
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M Saraswathy

Moneycontrol News

Consumers delaying home appliance purchases such as air conditioners, refrigerators, televisions and washing machines expecting a GST relief may be in for a shock. They may also have to prepare for another blow — a hike in consumer appliances prices. The GST Council, which meets early next month, is not in favour of reducing the existing 28 percent GST rate applicable on the segment, sources told Moneycontrol.

“White goods are still a luxury and not a necessity for a large proportion of the Indian population,” said a senior official close to the development. Industry bodies have been in  vociferously seeking a cut in Goods and Services Tax (GST) to 18 percent.

In fact, customers may as well make their purchases now, as white goods manufacturers may hike prices in the next six months.

TV, a luxury?

When the GST Council decided on the rates for almost 80,000 items in May 2017, products were segmented into four brackets — 5 percent, 12 percent, 18 percent and 28 percent.

White goods, often considered a luxury item, attract the highest quantum of taxes.

Not surprisingly, television sets, refrigerators, dishwashers, air conditioners and washing machines have been placed in the same GST bracket as Bentley car, which costs at least Rs 2.5 crore.

To put their point across, several industry bodies representing consumer appliances’ companies had held several meetings from July 2017 with the GST Council to request for the products to be brought into the 18 percent slab.

“Our market surveys show that consumers have postponed their decision to buy products in an expectation that rates will fall,” said a senior official of a consumer durables major.

But members of the Arun Jaitley-led GST Council hinted that there was no sufficient data to suggest that such products were an utmost necessity at households across the Indian geography.

Surcharge impact

Also, in a bid to provide an impetus to domestic production, the Finance Minister had hiked import duty on products such as television sets to 15 percent in his Budget announcements . A social welfare surcharge was also imposed on imported products.

Hence, for global players, GST and import duty could be a double whammy. Though prices for white goods have not been hiked so far, a 5-10 percent increase may be on the cards in the next six months.

The industry bodies had lobbied for a reduction stating that several customers in semi-urban areas have been impacted by the increase in taxes, making these products unaffordable for them.