Fans can be considered as a utility rather than a luxury. India is a country in the tropical region, and the rising temperatures due to global warming instigate the buyers to install a fan in their homes and workplace. Being a necessity, fans were available at an affordable cost so that everyone can afford it. This was the case some days ago until GST was introduced.
Today, 28% GST is levied on fans. This has increased the purchasing cost of the fans. The negative effect can be seen both on customers and the manufacturers. Here, we will see how 28% GST on fans affects the manufacturers and the buyers.
Effect on Buyers
Talking in the simplest terms, the increase in prices will directly impact the buyer. Earlier, the effective tax rate was around 26% and now, it will be 28%. Hence, an increase in the selling price is bound to happen. Most of the areas in India experience hot and humid climate. The southern India is prone to extreme heat. The fans are a necessity here. Therefore, an increase in prices is an unfavorable situation for the buyers. The buyers who struggle to meet their daily needs would feel reluctant to invest money in fans.
The fans, coolers, and air conditioners have been kept in the same GST slab of 28%. Coolers are available in the mid-segment range and air conditioners fall into the luxurious category. 28% GST is appropriate for these two items since people from middle and upper class can afford it. But fans are purchased by every section of the society. While the lower middle class and above will not bear the brunt of increased prices, poor people will be directly affected. Even under UJALA scheme, the cost of 5-star rated fans has risen from Rs 1,150 to Rs 1,200.
Effect of Manufacturers and Sellers
The Indian fan industry witnesses 5 million fan sales per month. These include ceiling fans, pedestal fans, and industrial fans. The growth rate is approximately 10 percent per annum. Now, application of 28% GST may impact the sales in a negative manner.
The Indian Fan Manufacturer’s Association (IFMA) is not in favor of this move. They want the government to reduce the tax to either 12% or 18%. According to them, since a fan is not a luxury but a need, the government should consider this factor while implementing the tax rate.
The Rs 9,000-crore fan industry comprises of the organized sector and the unorganized sector. The organized sector forms the major section with Rs 6000-crore business and the unorganized sector values at Rs 3,000-crore. If the tax rate is reduced, it would be easy for the players in the unorganized sector to adopt the formal system. Otherwise, we will witness an increment in the unorganized sector.
This is evident that fans are a necessity and hence, it should be affordable and easily available. But 28% GST doesn’t promote this propaganda. Hence, IFMA’s demand for reduction in tax rate is a valid point. The government should consider this issue so that the customers, sellers, and the manufacturers are not affected adversely. Check it out the latest price of BLDC fans.