High-end TVs may see 20 percent price increases in festive season

The goods and services tax (GST) rates for a majority of consumer durables, including televisions of up to 27 inches, have been reduced from 28 percent to 18 percent, leading to hopes of a price cut.

But customers wishing for a bigger TV may have to shell out more.

Prices of television sets (32 inches and above) may increase by 20 percent during the festive season due to the triple effect of high GST, shortage in LED panels and rupee depreciation.

The rupee touched a new low of 69.12 against the US dollar on Friday and analysts expect it to depreciate further. Since most of the raw materials for the televisions are imported from abroad, there is direct impact on the pricing. Added to this is the global shortage of panels, which are the main component of television sets.

Avneet Singh Marwah, CEO of Super Plastronics, the licensee of Thomson and Kodak television brands in India, said,”Panel manufacturers have together created this global shortage to hike prices considering Indian manufacturers tend to buy in volumes ahead of festive season, to ready the stocks.”

Industry sources said about 65-70 percent of the market is now dominated by the 32-inch and 40-inch televisions. Though the consumer durable firms were in active discussions with the GST Council to reduce the tax rate for this industry, the bigger inch TVs have still been clubbed with luxury goods.

GST was also reduced on washing machines, refrigerators and mixer-grinders.

A large all-India dealer of electronic goods told Moneycontrol that LED televisions of 32 inches and above have already started seeing a price increase of 20-25 percent.

“From the first week of July, large consumer durable firms have started to raise prices of the big screen television sets. This is just in time for the festive season that will commence with Onam and Raksha Bandhan,” he added.

While double-door refrigerators as well as fully automatic washing machines have now been put into the 18 percent bracket, large LED TVs have been retained in the 28 percent slab.

Manish Sharma, President and CEO, Panasonic India and South Asia, said they had hoped for television up to 43 inches to be bracketed in the 18 percent slab to improve penetration of the products.

In addition to the rising taxes is the double whammy of rising input costs for materials like panels. This is not the first time that an artificial shortage of panels has been created. The chief of a mid-size consumer durables major explained that in the past five years, there have been multiple occasions where panel makers have tried to hold up stock to create a short supply in the market.

The industry has decided to engage with the GST Council to get a partial relief in the tax rate so that the price rise impact can be minimized for consumers.

Marwah explained that panel prices have already increased by 30-35 percent and this will be passed on to customers. “The 32-inch and 40-inch televisions constitute almost 70 percent of the television market. The GST Council should reconsider the tax rates for this segment that has 33 percent market penetration whereas products like fully-automatic washers and double-door refrigerators have about 12 percent penetration,” he added.

The GST Council may meet again in the first week of September. However, sources said it is unlikely that tax rates for high-end television sets would be brought down to 18 percent in the near future. – Forbes India

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