‘Prices of hand­bags, lug­gage to rise by 10-15% af­ter 28% GST’

Shoes & Accessories - - The Month That Was | Updates I India -

Gov­ern­ment’s de­ci­sion to im­pose 28% goods and ser­vice tax (GST) on hand­bags and lug­gage will lead to mas­sive tax eva­sion from un­or­gan­ised re­tail­ers and man­u­fac­tur­ers, apart from in­creas­ing the price of the prod­ucts by 10-15 per­cent, stated Dilip Pi­ra­mal, chair­man of VIP In­dus­tries. Prod­ucts like school bag and sports bag will also fall un­der this tax slab.

“Soft lug­gage which is 85 per­cent of the mar­ket is es­sen­tially a tex­tile op­er­a­tion. These prod­ucts can also be made very eas­ily by small busi­nesses be­cause there is no tech­nol­ogy or heavy ma­chin­ery in­volved. So for such a prod­uct where the tax rate is so high, it will make the prod­uct 10-15% ex­pen­sive. Be­cause the un­or­gan­ised sec­tor can make this prod­uct very eas­ily and since half of the mar­ket is un­or­gan­ised, the tem­pa­tion to evade the taxes for the un­or­gan­ised play­ers at 28 per­cent is very very high,” Pi­ra­mal stressed.

Last month, the GST Coun­cil fi­nalised a four-tier struc­ture for tax­a­tion of both goods and ser­vices at 5, 12, 18 and 28 per cent.

Pi­ra­mal along with his as­so­ci­a­tion, ‘Lug­gage and Hand­bag Man­u­fac­tur­ers As­so­ci­a­tion’, which in­cludes VIP In­dus­tries, Sam­sonite, Sa­fari In­dus­tries and Wild­craft among oth­ers, met with the gov­ern­ment of­fi­cial re­cently to put their point for­ward on the ex­ces­sive tax rate be­ing im­posed on their in­dus­try. Pi­ra­mal said they were meet­ing of­fi­cials in fi­nance min­istry in New Delhi to make their rep­re­sen­ta­tion in a hope to get the GST rate re­vised.

Ac­cord­ing to the chair­man, they were hop­ing bags and lug­gage to come un­der 18% GST rate as they were al­ready paying taxes in tune of 18%. “What has hap­pened is that most con­sumer durables goods have been put un­der 28% GST rate slab. Now most con­sumer durables are like air con­di­tion­ers, wash­ing ma­chines are much more ex­pen­sive. These are prod­ucts whose start­ing price is in up­wards of ` 10,000 and goes till ` 50,000. Since lug­gage lasts long and it is not a item of daily use, it can be clas­si­fied as con­sumer durable but it is not such an ex­pen­sive item. We are very much like the ap­parel and shoe in­dus­try,” said Pi­ra­mal.

“I think since the gov­ern­ment has put lug­gage and bags in the con­sumer durables cat­e­gory, we are sub­jected to 28% rate. I can­not think of any other rea­son why the gov­ern­ment would do this. The gov­ern­ment is will­ing to talk and they are ac­cept­ing the fact that some items have been taxed more but definitely the in­ten­tion of the gov­ern­ment is not to over bur­den busi­nesses with in­creased tax. The gov­ern­ment is very clear of that,” he added.

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