KOLKATA: Indian fanmakers expect that a 28% Goods & Services Tax (GST) will blow away the 5-7% annual growth for the Rs 6,5007,000 crore industry.
Big players like Havells India, Usha International, Maharaja Whiteline and others said growth will be flat in 2017.
These players said that the price conscious rural India will choose to compromise on quality and opt for low quality electric fans available at lower prices.
“A fan is not a luxury item but a necessity . The GST Council should have kept this perspective in mind before keeping it in the same bracket as that of air conditioners, refrigerators and other luxury items,” said Saurabh Goel, vice-president, electrical consumer durable, Havells India.
The industry missed out on sales during the peak demand period of summer, when GST was launched. “There was destocking at the end of channel partners. So, in the first quarter of the current fiscal, there has been no growth.And in the first nine months of calendar 2017, growth has fallen flat vis-a-vis previous year. Prices of fans have gone up by 3% post GST,” said Rohit Mathur, president, electric fan division, Usha International.
Sunil Wadhwa, CEO, Groupe SEB India, that makes Maharaja Whiteline fans said that the maximum rate should have been 12% on electric fans. “Demonetisation, destocking and then high GST have left a negative impact on the trade. The market is likely to remain flat this year,” he added.
Industry executives said the GST Council has just added the erstwhile taxes – VAT at 14% and excise at 12.5% and arrived at this tax rate.
“But a lot of fan units were operating from excise free zones and hence the tax revenue earned by the government was lower than this rate,” said Goel. “The objective of offering a good quality fan at an affordable price will be greatly dampened with high GST rate,” he added. The Indian Fan Manufacturers Association (IFMA) has already made a representation to the finance ministry and GST Council to lower the GST rate.
“Fans are a basic necessity in a tropical climate like India for people from all strata of the society , urban and rural, and should not be clubbed with air conditioners in the luxury category. One third of the fan industry is in the unorganised sector and if the GST had been lower, then compliance would have increased, resulting in better revenue generation for the government,” said Mathur, who was also the past president of IFMA.