Plastic furniture to cost a bomb post GST

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Plastic furniture predominantly used by poor and common people is set to cost a bomb post the implementation of the Goods and Service Tax (GST) from July 1 as the prices are projected to go up by a minimum of 12%.

At present, plastic furniture products attract a value added tax (VAT) of 12.5% and the central excise duty of five per cent, taking the cumulative taxation on them to 17.5 per cent.

But under GST, these products are levied with 28% tax, a straight 10.5 per cent increase in the tax burden. Given the extra costs due to monthly filings and other procedural issues, the overall additional financial burden on the account of GST is estimated to be around 12%.

The extra tax burden on small scale industries is far higher at 23% as they are currently exempted from the VAT in Andhra Pradesh and Telangana and so only pay the central excise duty of 5%.

As most of the companies that manufacture these products fall under the small scale category, the impact of the tax hike is likely to be far wider.
“It is the poor that use plastic furniture as they can’t afford wooden and other kinds of furniture which are obviously expensive. Poor people use them because they are cheaper. We sell a plastic chair for around INR 120 and that shows how affordable the plastic furniture is. Unfortunately, the central government has slotted these products under the luxury category of 28% tax,” said K Somasekhara Reddy, Managing Partner of Hyd-based Sree Industries, and Treasurer, AP & TS Chapter, All India Plastic Moulded Furniture Manufacturers Association.

“Before finalising the GST rates, the government has informed us that the tax implication will only be on the value additions and will be revenue neutral. However, our raw material is taxed at 18% and we have to pay an additional 10% tax due to mismatch in input and output tax”. Fearing significant drop in sales due to tax hike, he said the high tax will deprive poor people of basic furniture.


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