Small traders hope for revival after GST cut

Traders of key items such as leather goods, lighting equipment, and ceramic tiles, which have seen a downward tax revision, are now pinning hopes on the wedding season and prices of products to fall for a business revival.

There is a resigned look on Ahmadullah Khan’s face, a small wooden board manufacturer in New Delhi. Operating out of a small hole-in-thewall he calls his shop on Timber Market Road in the Capital’s trade hub, Khan says it will be hard to make up for the lost business now that the festive season is over.

This is despite the goods and services tax (GST) Council’s recent revision from 28 per cent to 18 per cent on several items, including wooden furniture, footwear, luggage, lighting equipment, all kinds of tiles and sanitaryware, among others. Comprising largely small and medium manufacturers and traders, like Khan, who collect wood shavings from several manufacturing units and manufacture wooden boards, these industries are uncertain if the revision is timely.

For Radhe Shyam Bansal, who operates a store selling wooden panelling for walls and floors from West Delhi’s Kirti Nagar market also called ‘Asia’s largest furniture hub’, the change in tax would do little to stop the growing popularity of plastic based polyvinyl chloride (PVC) panelling. A cheaper and more durable alternative to wood, PVC panels have, over the years, gained acceptability among a growing number of consumers.

In other products and categories, traders of key items such as leather goods, lighting equipment traders, and ceramic tiles, which have seen a downward tax revision, are now pinning hopes on the wedding season and prices of products to fall for a business revival.

For instance, Kamlesh Gupta, a large format store owner for luggage in New Delhi’s Lajpat Nagar, is relieved after hearing the GST Council’s decision on Friday. Sales of suitcases, trunks, and vanity bags, among others, had fallen by four-seven per cent in the last four months due to price hikes, coupled with poor consumer sentiments.

“The trend was making me weary. Now, hopefully, all manufacturers will be forced to reduce prices as they were also feeling the pinch. Wedding season is smaller than Diwali, in terms of business, but it is better late than never,” Gupta said.

Morbi in Gujarat, which happens to be the second-largest tile manufacturing hub in the world at a turnover of ~30,000 crore, has seen business fall by 50 per cent since July 2017. A 28 per cent GST had not only resulted in a fall in production to that extent, but also put several small-time traders out of business.

“There are 2,200 traders and 700 tiles and sanitaryware manufacturing units in Gujarat, largely based out of Morbi. Of these, only 1,200 traders are registered under the GST, while the rest were gradually put out of business by high taxes. The tax revision may now see these small and medium traders and units regain business, going forward,” said K K Patel, president, Morbi Ceramic Trading Association.

According to K G Kundariya, president, Morbi Ceramics Associations, which represents the bulk SME manufacturing units in the cluster, production at almost half of the units could now resume with the latest rate revision in the GST. India is now the second-largest market for ceramic tiles after China, with production at 750 million square metres. The unorganised sector accounts for 60 per cent of the ceramic tiles industry, while the organised sector forms the remaining 40 per cent.

Larger players like S C Kothari, chief executive officer, Cera Sanitaryware, are of the view that a slash in the GST will now increase compliance in the industry. “Contrary to expectations, the unorganised sector didn’t fall in line with the new regime. The reduced rate of 18 per cent will increase compliance among small and mediumsized enterprises, leading to a rise in government income in the long run. We believe sales will increase, too, now,” he said.

“This will not only augment the sector growth, but will also encourage unorganised players, which were facing problems after demonetisation and slowdown in real estate, to pay tax. At 18 per cent GST, the pricing gap between the unorganised and the organised players will narrow, which will ultimately benefit the industry as a whole,” said Kamlesh Patel, chairman and managing director, Asian Granito India.

Meanwhile, the rate cut may also bring good news for the retrenched workers in clusters such as Lohar Chawl of Mumbai.

Many wholesalers and retailers of these articles in Lohar Chawl, the wholesale trade hub, where a lot of electrical items are available at half the retail prices, had retrenched workers in the last four months. “We will bring them back with the increase in our business,” said Manjunath, a shopkeeper selling both branded and unbranded mattress here, who plans to call 40 workers back.

Puneet Dhingra, an electrical products trader in New Delhi, said the high taxes were choking the business as consumers were simply returning empty-handed after a hard bargain. “Light fittings and decorative lightings are indispensable for buyers during the wedding season like it is during Diwali. Also decorators will, hopefully, be able to buy more as per unit prices go down. This will help us do more business,” he said.