The Ministry of Electronics and IT and the Department for Promotion of Industry and Internal Trade (DPIIT) have pushed for reduction of goods and services tax (GST) on large-screen LED televisions and air-conditioners to 18% from 28% to revive demand in the festive season, said two senior industry executives.
This is the first time that the ministry and DPIIT have pushed for a reduction in GST on these products and the industry is pinning its hopes on a tax cut in the GST Council meeting scheduled to take place in Goa on Friday. The recommendations have been routed to the GST Council through the finance ministry, said the executives.
At present, televisions up to 32 inches attract 18% GST but those with larger screens attract 28% duty. Refrigerators, washing machines and microwave ovens come under the 18% GST slab while air-conditioner is the only appliance which is in the 28% tax segment.
Television sales have slowed down significantly in the past two years. As per the latest data from sales tracker GfK, online television sales declined 16% year-on-year in July in terms of absolute numbers while in offline retail the contraction was 1%. AC sales have grown this year owing to a harsh summer, but more energy efficient models with 4-star and 5-star ratings have not sold well because of high prices. The industry fears there might be pressure on AC sales in 2020 owing to upgradation in energy efficiency norms which will lead to a further increase in prices.
Emails sent to MeitY and DPIIT did not elicit any response till press time.
Television is the only category where there are two GST rates, said R Zutshi, senior director, LG India. “Even luxury cars and high-end smartphones have same GST. Sales of televisions up to 32 inches are declining, accounting for 55% share in overall sales as compared to 75% two years back as consumers want to buy larger screens. Consumers are also postponing purchases expecting a cut in taxation,” he said.
Kamal Nandi, president of Consumer Electronics and Appliances Manufacturers Association, said if there is a reduction in GST rates for TV and AC, prices would come down immediately by 7.8% and boost sales. “These two categories account for 40% of the Rs 80,000 crore market, dragging down growth,” said Nandi, who is also the business head at Godrej Appliances.
The association has said in its recommendations to the government that owing to the 18% GST on television components, lower than the 28% on finished products, grey market is flourishing and has grown to become 20% of the total industry sales. Gadgets Now