GST UNVEILED

Paint prices are expected to remain stable under the goods and services tax (GST) as its impact is neutral.

The GST rate on paints is 28 per cent, which current effective taxes add up to. Excise duty accounts for 12.5 per cent, with states charging value added tax (VAT) of 12.5-14.5 per cent. Paint companies also pay an additional 1.67 per cent VAT on the excise duty.

The decorative paints segment comprises 70 per cent of the ~40,300 crore industry and powder coatings account for 3-4 per cent.

“The GST will not change the price at the consumer end although there will be some adjustment at the dealers’ end,” said Abhijit Roy, president, Indian Paint Association.

Also, raw material prices have stabilised after a rise earlier this year. Dearer vinyl acetate monomer and titanium dioxide had forced paint companies to hike prices by 5.5 per cent.

“As far as the trend shows, there is not going to be any change in paint prices,” said Roy, who is also managing director and CEO of Berger Paints.

However, the industry will feel an initial stress for at least a month after the GST is rolled out. The industry is confident that dealers and retailers, who are yet to comply with the GST system, will become ready before the July 1 deadline.

“Even if demand falls initially, the deficit can be made up in the following months. After all, demand is strong,” said S Mahesh Anand, president of the decorative business at Nippon Paint (India).

According to Jalaj Dani, who until recently was on the board of Asian Paints, industry sales are likely to grow by 10 per cent in volume and 15 per cent in revenue. “It needs to be seen how the GST plays out. The unorganised part of the trade has been evading taxes and may continue the practice,” Roy said.

Companies that have stocks dating beyond a year will not be able to claim input credit for this part of their inventory. Such stock accounts for 1-2 per cent of paint companies’ inventory.