Post GST, as country is looking forward, most companies related to interior products are positive while major portion of wood panel sector is demotivated, feeling suffocated due to steep 28% slab. Experts say, ‘being tax evasion prone sector, the authorities have punished it with highest tax slab’ but there are reasons to see it from a different lens rather than putting the entire industry in the same box. The exempted units (SSI/MSME < 1.5 cr/year) were the least contributors to taxes but with the tightness in law, they wont be able to continue the same. Implication of genuine GST slab (18%) will make them significant contributor to tax revenue. Otherwise, there is fear, most of them will shrink and die. If entrepreneurship & employment is a priority for government, and facts are genuinely considered, then Plyboard, Doors, MDF and PB deserve to be levied at 18%.
Costing in a plyboard unit has 50% share to timber (plantation only) sourced from planters (mostly not GST registered, small farmers), hence no input credit can be availed. Approx. 25% cost goes to manufacturing expenses which hardly enable input credit. Balance 20% from Glue & Face veneer with input credit (According to calculations shown by associations, a total 3.6% INPUT TAX CREDIT ONLY). Hence credit availed by industry will be far lesser compared to other building materials, leading to crushing of smaller units.
Many products with better input credit are kept under 18% which makes Plyboard, PB and MDF a fit case for reconsideration of slab from 28 % to 18% that has hardly 4.0% of input credit, making products costlier by 10%.
In construction, GST on materials like steel is 18%, aluminium (18%), bricks (12%) but in similar project where Doors, Windows and Plywood, Particle boards, MDF are used as basic raw materials, GST is at 28%.
How can it be justified?
All these products are manufactured with Plantation timber (or waste wood of plantation that goes into fire wood, leading to carbon emission) as a direct produce by farmers in the field. This not only generate decent income source for farmers but also a substitute of natural forest wood products hence contributing to country’s target of growing tree cover. It is not logical to compare plyboards, MDF with other materials like tiles, marble, sanitary in lieu of above cited justification.
It is in the best interest of Wood Panel industry for Associations to approach respective authorities and ensure MSMEs survival. Thankfully, due to GST & unusual 28 slab, several associations have become active. They are listing manufacturers who are not co-operating towards organisedculture. Hence, evaders cannot escape further. For people who are relaxed with the thought, ‘E-way bill is postponed indefinitely’let me tell you, don’t make this mistake. My message to the industry is – “If wood-panel industry wish to sustain post 2019, it ought to be organised today! You ought to be organised today.”