Under GST cables, wires, and electronic components will be taxed at 28 percent while the current effective rate is 18.12 percent. The industry wants the rate to be revised at 18 percent.

July 19, 2017

Fearing higher GST rates on wires, cables & electronic components could have a crippling effect on the manufacturers, industry associations have demanded lower GST rate of 18 percent for these key products, said a media report. While the current effective tax rate for these products works out to be 18.12 percent, under GST they will be taxed at 28 percent.

A delegation of various associations led by Chamber of Associations of Maharashtra Industry and Trade (CAMIT) met Rajiv Jalota, Commissioner of Sales Tax, Maharashtra, on Saturday, to put forward their demand to revise GST rates for products under the HSN Code 8544 (such as winding wires, coaxial cable and optical fibres) and HSN Code 8536 (such as electronic components like switches, connectors and relays) from the proposed 28 percent to 18 percent.

Present at the meeting were, Mohan Gurnani, Chairman of CAMIT, Nikunj Turakhia, President of Steel Users Federation of India (SUFI), Hemant Parekh, President, Bombay Metal Exchange (BME), Mitesh Mody, General Secretary of All India Electronic Association, Inder Jasinghani, CEO of Polycab Wires, among others.

Current rate of excise duty and VAT on all wires, cables and electronic components across all the major states is 12.5 percent and 5 percent respectively, resulting into current effective rate of 18.12 percent. Industry fears that reclassifying cables, wires and electronic components falling under HSN Code 8544 and 8536 in 28 percent slab rate of GST, will lead to inflation as compared to the prevailing rate.

The rate of GST on raw materials used for cables and wires is fixed at 18 percent. “Charging higher rates on end products is absolutely unjustified. The cable and wires industries is labour intensive and already reeling under tremendous pressure due to power sector woes and operating at less than 50 percent of its installed capacity. Hence it will not be able to bare the differential tax burden of 10 percent on its finished goods,” said Mohan Gurnani, Chairman, CAMIT as per the report.

Cables account for almost 82 percent of the turnover of cables and wires industry. Wires and other products account for balance 18 percent of the total turnover of the industry. It is understood in the GST rules that, all the CAPEX items will be subjected to 18 percent GST.

Different rates of GST for products will result into huge revenue leakage and subjecting the entire industry at 28 percent will shoot up the capital cost for the industries as well as end users, Gurnani was quoted as saying.