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Consumer Durables Industry Hopes For Lower GST On Appliances, Larger Stimulus To Improve Demand


After witnessing a low growth post the Covid-19 pandemic, the consumer durables and electronics industry has considerably put itself back to growth. The summer seasons of 2022 and 2021 saw a positive trend for the industry .

Household appliances and electronics saw an uptick in demand as consumers stayed indoors.

According to a September 2022 CRISIL analysis, the consumer durables industry had crossed the pre-pandemic mark in value terms last fiscal; this fiscal it will scale past the pre-pandemic volume mark by ~3%.

It will see revenue grow 15-18% to Rs 1 lakh crore this fiscal, led by a 10-13% increase in volume.

The analysis had added that demand will be driven by both urban and rural segments, though rural demand will come into play in the second half of the fiscal.

As the Union Budget 2023-24 will be presented soon, the industry is optimistic about the prospects of the sector and seeking some measures to push the growth further from Finance Minister Nirmala Sitharaman.

Manish Sharma, chairman, Panasonic Life Solutions India, Chair for the FICCI Committee on Electronics & Manufacturing, said that the budget is being presented at a critical juncture when the global economy is going through geopolitical uncertainties, rising inflation, and sluggish growth. Calculative actions to strengthen the domestic sources of growth are essential to maintain the current trajectory of steady economic growth in the country.

Also Read: Budget 2023 Expectations: Focus On Air Cargo, Adequate Funding Under National Logistics Policy

The industry feels that the government continues to remain committed to introducing and implementing reforms leading to ‘Ease of Doing Business,’ focusing on encouraging investment for making India ‘Atmanirbhar’ by promoting ‘Make in India’ initiatives aggressively.

Sharma added that with this backdrop, industry expects the Union Budget to include reforms that stimulate consumption and improve consumer demand.

Kamal Nandi, business head and executive vice president, Godrej Appliances, said, “Large appliances industry suffers from continued low penetration levels in India despite the positive impact on the quality of life and productivity. Further, last year saw stagnation in the high-volume mass segments due to prevailing economic conditions and low consumer sentiment among the middle class apart from continued cost impact to the industry due to commodity, currency, and regulatory norms.”

“Given this context, a lower GST on appliances will help,” Nandi urged.

Like Shamra, Nandi too urged the government to consider a larger stimulus to the middle class to induce spending and lift the overall economy which will benefit multiple sectors.

A strong component eco system will help the industry, Nandi said, adding, “We also recommend zero duty under IGCR for all inputs (components and commodities) used in manufacture of parts such as motor, compressor, timer etc.. Additionally, for refrigerators, imposing non-tariff barriers on FG imports is recommended, like in Air Conditioners (AC).”

Sharma too urged the government to consider rationalisation of tax rates on certain consumer durable electronics such as ACs and televisions (TVs).

He added that these are no longer ‘luxury’ items and have become common and essential household items. The energy efficiency of air-conditioners has steadily increased, and they now offer added features such as air purification which is important in urban areas.

Also Read: Budget 2023 Expectations: EdTech Industry Bets For Youth, Collaboration With Universities

The under-penetrated AC segment will be the key growth driver for the industry. Demand for ACs and refrigerators is being driven by changing weather patterns, CRISIL analysis noted.

Sharma urged that lowering the tax slab to 18% from 28% would help offset the price pressure and spur demand for both AC (Split and Window) and television (above 105 cm), thereby improving affordability among customers, attracting investments in component manufacturing, and help in penetrating deeper into the market, especially for the AC category.

For manufacturers, Sharma welcomed reforms like the Production Linked Incentive (PLI) scheme as it showcases the government’s intent to promote healthy backward integration and provide impetus to domestic manufacturing while elevating India’s position as a global manufacturing hub.

As the next steps towards indigenisation of components of Ref, RAC, and LCD/LED TVs, under the Phased Manufacturing Program (PMP) scheme, he said that the industry would expect the administration to simultaneously increase in import duties on the components (Back Cover Sheet, Bezel, Refrigerator Motor, Room AC (FG), etc.) over the period of time to provide an incentive for local manufacturing units. For instance, increase basic customs duty (BCD) on Refrigerator Motors to upto 22% (over a period of 4 years) from the current 10% BCD.

“In addition, under the Remission of Duties and Taxes on Export Products (RoDTEP) scheme which came into effect from 1st January 2021 until 2025, we would encourage the government to consider granting the benefit on export of goods under the mentioned scheme at 5% on FoB (free-on-board) value to ensure that the exporters receive the incentive on the embedded taxes and duties, previously which were non-recoverable,” he added.

Last year, industry body CEAMA, had said that the Indian Appliances and Consumer Electronics (ACE) market is expected to almost double in the next three years to around Rs 1.48 lakh crore by 2025, led by increasing domestic demand.

The foreign direct investment in the ACE industry has also almost doubled to $481 million till June in 2022 as against $198 million in 2021.

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