GST impact: Wet Grinder industry fears major blow with 28% rate

Item, mostly used by poor people, will attract the rate applicable to luxury items

The wet grinder industry in Coimbatore, which supplies the product to the rest of the country, is protesting at the 28 per cent rate fixed on it under the coming goods and services tax (GST). The present value added tax (VAT) rate is four per cent.

This development comes when manufacturers in Coimbatore were expecting the replacement market to pick up. They were also planning to expand in the northern states.

"We got good enquiries from the north but with this 28 per cent rate, nobody will buy," says M Radhakrishnan, president, Coimbatore Wet Grinders and Accessories Manufacturers Association (Cowma). A 28 per cent rate translates to a price increase of Rs 840 a unit, of which the reimbursable bit is only Rs 240.

"I don't think customers will absorb the price increase. This is crushing both sides (them and manufacturers)," said Radhakrishnan. He noted that the overwhelming majority of manufacturers had been exempt so far from excise duty, owing to their small-scale or micro size.

Cowma has urged that the GST rate be reduced to the 12 per cent category. "Wet grinders are not a luxury item," complain their heads, pointing to its use in home kitchens. The bulk of customers are middle class or poorer, says Radhakrishnan. Which was why the Tamil Nadu government had, in the past four years, bought for free supply to households, in fulfillment of a poll promise.

In these four years, the state government had procured 18 million wet grinders, worth Rs 3,600 crore, from Coimbatore's manufacturers. And, brought down its value added tax (VAT) on this to four per cent, from the earlier 12.5 per cent. Cowma says output rose, as a result, from an annual 1.2-2 mn wet grinders to 4.5 mn.

However, the free distribution scheme had been recently discontinued, a blow for the sector. "We are manufacturing at only 20 per cent of our old capacity (1.5-2 mn yearly)," said Radhakrishnan. The GST development comes in the wake of this.

The industry has given the argument that if the tax concession is not given, there would a huge impact on incomes and jobs. Wet grinder manufacturing in Coimbatore dates back to 1963 and currently employees around 10,000 people directly. There are about 50 manufacturers and 350 suppliers in this city; it even, in 2005-06, was granted the Geographical Indication (GI) brand recognition.