Will GST hurt the Plastics Industry and in turn the common man?
But, it seems while fixing GST rate on many plastics products may have escaped attention of GST council. Pointing at the dangers of hurting the poor and middle-class of India, industry leaders made a plea that plastic products are mostly used by common man, poor and middle class and hence should be considered as merit item in everyone’s daily life. While some of the plastics products have been kept below 12% tax bracket, a large number of plastics items have been placed in 18% tax brackets while some are even being placed at highest tax bracket of 28%. The industry leaders feel that overall increase in tax will not only hit thousands of small & medium plastics industries but will also hurt the poor and middle class and lead to increase in prices of plastics products used by economically lower sections of society.
Pointing to the anomalies, K K Seksaria, President, Plastindia Foundation, mentioned, a few items such as plastics furniture, tarpaulin woven & non woven raffia fabric, plastics for office and school supplies, PVC floorings, PE interlocking mats, vacuum flasks and other misc articles of plastics not mentioned elsewhere which are mainly used by common man have been kept under highest GST tax bracket of 28%. Plastics furniture, though light weight and low in cost but a voluminous article incurring huge transportation, storage and distribution costs, the cascading effect under GST rate of 28% will be very prohibitive. “Further, under present indirect tax regime, the Central Excise is to be paid only upto manufacturing stage but under GST tax regime the CGST impact will be right upto the end consumer.” added Seksaria.
In fact, the parent ministry, the ministry of Chemicals and Fertilisers, had recommended GST rate of 12% on all plastics raw materials, machineries and plastics finished products.
Seksaria further gave justification for reduction of GST rate on a few items from 28% to 12% and on all other plastics items also should be kept under uniform GST rate of 12%. These include furniture, Tarpaulin, woven & non-woven raffia fabric, plastics articles for office & school supplies, PVC floorings, plastics interlocking mats, vacuum flasks and other miscellaneous articles of plastics not specified elsewhere.
He said that overall a large cross-section of plastics industry leaders believe that the tax burden would increase, something that goes against the government’s promise of GST reducing the overall tax rate. Higher taxes on plastics industry will impact not entire plastics industry but will also create an inflationary pressure on economy.
Plastics industry in recent past is growing at an annual average growth of more than 10 % and is contributing significantly to the GDP growth. The industry exported plastics worth $7.9 billion in FY 2016 – 17. As an industry’s apex body, Plastindia Foundation believes that SMEs are likely to be impacted most. Out of about more than 50,000 plastics units, over 95 % are in medium & small scale industries.