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