GST impact: Rs 1,100-crore UP plywood industry on the verge of closure

The plywood industry attracts the highest GST slab of 28%; in UP, it also attracts a 2.5% mandi fee

Even as small and medium enterprises (SMEs) and traders continue to face transitory challenges and irritants after the rollout of the goods and services tax (GST) regime from July 1, the plywood industry in Uttar Pradesh (UP) is on the verge of a collapse.

The UP plywood industry, estimated to be worth over Rs 1,100 crore, accounts for roughly 10 per cent of the country’s total plywood space. In the state, the plywood industry employs almost half a million people.

The plywood industry attracts the highest GST slab of 28 per cent, while wood, adhesive and sunmica attract an 18 per cent rate.

“The imposition of 28 percent tax on plywood has pushed it beyond the reach of common man, which implies that the state’s plywood industry would also eventually die,” Awadh Plywood Manufacturers Association President Ashok Agarwal told Business Standard.

He further said the plywood industry has already been facing burden because of 2.5 per cent mandi fee on raw materials, which had not yet been waived despite several representations and memorandums to the relevant state authorities.

“Therefore, the effective tax rate on plywood products in UP tops over 30 per cent, which has simply rendered us uncompetitive and unviable to survive and our units are virtually at the brink of closure,” he warned.

Plywood manufacturers across the country had observed four days closure of their businesses from July 14 to 17. UP state plywood manufacturers also tried to catch the attention of the Yogi Adityanath government towards their plight through these closures. However, the state is yet to respond to their pleas. The maximum impact of the closure was felt in UP, Delhi, Haryana, Punjab, Uttarakhand, Bihar, Madhya Pradesh, Gujarat and Kerala.

“The higher tax incidence on plywood is also contrary to the government’s mission of providing housing units to every family since it has increased the cost of construction as well as plywood,” he added.

The plywood manufacturers have urged the government to reduce GST on plywood from 28 per cent to 18 per cent and also waive off the Mandi fee on raw material. Such a Mandi fee is applicable only in few states, including UP, Haryana and Punjab.

At the same time, entrepreneurs have demanded that the stringent provisions of the state forest department with respect to the renewal of licenses also be liberalised and eased for the long term viability of the industry.

In UP, there are about 500 plywood manufacturers, mainly concentrated in cities like Lucknow, Kanpur, Saharanpur. Lucknow alone is home to 50-60 plywood manufacturers.

Meanwhile, the manufacturers had already met Union Minister Santosh Gangwar for the resolution of their grievances and they also plan to meet state government officials and policymakers.