At 28% GST, Plywood Prices may rise by 10%

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Central government has proposed 28 % Good and Service Tax (GST) on Plywood products which is expected to roll out from July 1, 2017. The whole Plywood industry is shocked by the highest GST slab applied on plywood panels and is making fresh efforts to reach out to government for consideration in reduction in final bill. Different Plywood Associations and their members of Plywood manufacturers in states e.g. UP, Uttarakhand, Haryana, Punjab, Gujarat, Kerala, etc. have met their respective states ministers, central ministers, higher finance department officials in states and centre and sought for reduction of GST on Plywood, Block Boards and Doors in final proposal.

The President of FIPPI (Federation of Indian Plywood and Panel Industry) and Chairman of Century Plyboards Mr. Sajjan Bhajanka, also advocated for reduction of GST from 28%. Industry argues that most of plywood units come under SSI units, which are now exempted from excise duty and the industry have been passing the benefit to consumers hence they have to pass this taxed amount to consumers and finally the plywood will be dearer. Hence once all the plywood factories fall in same slab of GST from beginning then the prices of plywood have to rise by 10 percent to survive. If the tax slab would have been fixed at 18 percent the prices would have been on similar levels and industry could have sustained and managed to accommodate with marginal effects.

The analysis above is with respect to GST Slab of 28 % on Plywood. The slab is expected to come down from 28% to 18% as noted by industry association, decision on change of slab may come on June 18th, 2017.

Industry fears that once the prices of finished goods will be higher at such level, their product will be cost to much higher, and the demand will be immediately dropped drastically and they would not be able to survive. On the other hand, branded and organized plywood sector opines that they are still paying approximately the proposed tax rates so their product prices will be unchanged and now they are able to get share of informal sector, hence they will grow further.

It has estimated that there are 2600 operational plywood manufacturing units in India, of which 85 percent or above comes under SSI units category who are exempted from excise tax. Once GST is implemented on the 28 percent slab, around 1500 industries will not be able to either pass on the price or accommodate the tax burden and will ultimately closed down, thus creating a chaos like situation on supply gap and almost 3 lac people may get affected on employments

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