MDF and Wood Particle Board to be costly

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The most surprising increase has been on GST slab on wood particle board and MDF boards where GST of 28 % on is proposed. Both product categories have been fastest growing during last 5 years among all wood panels product bucket in the country. With approx 15 to 20 % of annual growth rate, dozen of new plants are coming to manufacturer MDF and Particle Boards but higher than expected rate of GST has certainly dampened their enthusiasm for a while.

PB and MDF are eco-friendly products because the boards are primarily using lops and tops of a plant which is wither used as firewood or waste and hence these materials are cheap compared to other panels used in furniture making and considered more environment friendly. But the highest GST slab on these products is like shock for the industry and trade. Experts feel that 28 percent slab would temporarily affect the growth momentum and product will become dearer in retail market.

The analysis above is with respect to GST Slab of 28% on MDF & Wood Particle Board. 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.

Presently MDF installed capacity in India has 2000 cubic meters which is estimated to be 5000 cbm per day by FY2018-19. Innovation in furniture or panel processing machines and modern tools is giving Indian furniture makers an opportunity to increase volumes as well aesthetics with the fine use of MDF boards. With more of CNC routing application on MDF and increasing taste for unique/creatively designed furniture’ MDF panels are looking at sharp growth during next three years.

Hence, if furniture comes under 28 % GST rate then MDF would not be much affected but it will certainly punch retail demand slightly for a while. The same can happen with Wood Particle board segment, which is mainly used by organized OEMs. The demand of Particle board is growing due to increasing offices and rise in demand of office furniture in Metro cities. After proposed GST of 28 % the retail demand would be expected to benefit Bagasse based particle boards sector more which is proposed at 12% GST slab. If Bagasse particle board segment improves quality and able to procure adequate quantity of raw materials, the sector can grow faster than present.

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