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GST’s impact on the furniture
industry
By Anil Mathur, Chief Operating Officer, Godrej Interio,
Anil Mathur, Chief Operating Officer, Godrej Interio, discusses the impact of the goods and
services tax (GST) on the furniture industry and how it will benefit customers in the long
run.
It has been nearly a month since the Greater choices
rollout of the goods and services tax
(GST), which is the biggest reform in Customers are also expected to have
India’s indirect tax structure with more variety to choose from, and the
implications for almost all business reason for this is simple: raw material
activity. Most sectors, including prices have become competitive with the
consumer durables, have been facing new taxation structure. This could
their share of hiccups during the translate into an increase in the usage of
transition period, although the situation different kinds of materials to make
is expected to smoothen out over the next furniture. As an example, plywood and
few months. The good news is that GST steel now come under similar tax
brings with it a number of positives for brackets. So India could see more steel
our customers. furniture choices coming into the market.
What’s in it for customers Mainstream moves
One of the biggest impacts for customers The tax reforms will have several
is that they will see monetary benefits. important implications for the
The GST reforms have led to basic prices manufacturing side of the furniture
in different categories dropping between industry. The organised segment faces
1-11 percent, depending on where the lower cost impacts as it can claim
manufacturing units are located. Brands benefits from the input credit, which
in the organised furniture segment such more or less offsets the increase in the
as Godrej Interio are already passing on tax bracket of the product.
these price benefits to their customers. The unorganised segment will face the
There may be some products which could brunt of the tax reforms. Currently,
face a marginal increase in the landed around 85-90 percent (or $17 billion) of
price depending on where they are India’s furniture market is unorganised.
manufactured. For instance, in some The players in this segment will now
places, instead of the earlier 22-25 have to get on board and become part of
percent bracket, furniture is in the 28 the mainstream. Hence, the furniture
percent tax bracket. However, since GST industry will get more consolidated and
is a value-added tax, if you look at the organised in the long run.
entire value chain and take the basic Simply put, GST will bring the entire
price drops into consideration, most supply chain into the tax network, which
customers will see benefits in the long will benefit organised players like us
run. because we will be on the same page as
