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GST’s impact on the furniture


               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

               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
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