Today, electronic appliances have become part of the very basic need especially in the urban scene. Most homes have a fridge, washing machine, AC, TV, etc adding up to about atleast 15 appliances per household.
Currently, we pay an average VAT of 11 – 12.5 % on most of the household appliances in most of states. Excise duty is charged at the rate of 12.5% . That totals to an average tax at the rate of around 25 – 26% on such goods (including other local taxes). With the Goods and Services Tax (GST) set for rollout in a month, retailers of white goods and electronics are hurrying to clear stocks. We suddenly note a deluge of sales and offers. As much as 40% discounts on Refrigerators, Air conditioners, Washing machines, TV sets and other items have been announced by several retail chains, who are looking to empty their inventories and minimize any losses that might come their way before July 1. Worried by the trend of retailers and distributors halting stock purchases to clear the current inventories, OEM’s like Samsung, Panasonic, Hitachi, Lloyd, Blue Star have announced promotional offers including discounts and extended warranties to rope in more customers.
The rate for each household electronic appliance like the fridge, washing machine, vacuum cleaner, etc is fixed at the rate of 28% under GST. It is likely that the increase in the tax burden by 2-3% under GST would be passed on to the final consumer. Placement of the basic appliances such as fridge and washing machine under 28% slab shows that electronic appliances are still considered as a luxury by our government.
OEM’s may not be able to provide any benefit of GST to the end consumer due to the tax rate of 28%.
While retailers are busy clearing off their old stocks, prices of most consumer electronic items are expected to increase by 3.5 percent post the GST rollout. However, price hikes may not be uniform across the states. Consumer electronic prices may not increase in Mumbai as the state government levies a high octroi charge, while prices may go up in states like Karnataka, Andhra Pradesh and Madhya Pradesh, though, where the current state levies are low.
Till such time, back to the sale.