Indian Electrical and Electronics Manufacturers’ Association (IEEMA) made a representation to the Government of India and the GST Council regarding high GST rates on Electrical Wires and Cables (HSN 8544). Presently, Electrical Wires and Cables are attracting a GST rate of 28%, and IEEMA has requested the government to get these items reclassified under 18% GST. GST rate of 28% are very high as compared to previous tax incidence of about 14%. This impact of high GST rate will lead to-
- Fuel Inflation: By keeping the GST rate of 28% on Electrical Wires and Cables (HSN 8544), the product has become costlier, fueling inflation, leading to high tax incidents and adversely impacting the domestic industry. This goes against the government’s commitment that GST would not be inflationary and lead to reduction in tax incidence, at the same time, promoting the domestic industry.
Since both public and private power utilities and the end users, constituting approximately 70% of the usage of Electrical Wire and Cables, manufactured in a year, do not get any Input Tax Credit; therefore, the cost of transmission and distribution of power increases and sets an inflationary trend in the economy.
- Increase in Working Capital Requirement: Almost all the raw materials used for manufacturing of Electrical Wires and Cables, are taxed at 18% under GST Regime. Hence, this huge gap between the rate of tax applicable on inputs and outputs is resulting in an effective increase of 14% in working capital requirement by the manufacturers of Electrical Wire and Cables, leading to an increase in cost of manufacturing. This will further have an adverse impact on the industry, which is already in a bad shape due to low domestic demand and surge in imports and also increase the Project Cost for the utilities.
Shreegopal Kabra, President, IEEMA stated, “One of the significant agendas of the Government of India is to provide electricity 24X7 to all and ensuring last mile connectivity through rural electrification. High rates of electrical products dissuade use of essential electrical equipment. A fair rate of 18% would encourage the use of these products in the rural areas and positively boost the rural electrification agenda of the Government of India”.
IEEMA Director General, Sunil Misra, said “As electricity is kept out of GST, no input credit of GST paid on electrical products is available to electricity companies. This means a higher rate of GST is incurred on inputs resulting in higher cost of final product. Since the electrical industry supplies equipment for infrastructure development of the country, IEEMA feels that 18% rate of GST should be imposed on all products used for Generation, Transmission, Distribution, and Consumption of Power.”
“Electrical Wires and Cables are mainly in the nature of the Capital Goods and constitute about 3 – 4% of the project cost, in every project, whether it’s an infrastructure, power, housing, industrial or a Commercial project. Electrical Wires and Cables are a necessity for all sectors of economy, and certainly needs to be charged at a lower rate of tax and not at 28%, which is a rate reserved for luxury items and items of prohibitory nature.” quoted Mr. Rakesh Amol, Chairman IEEMA Wire & Cables Division.