GST rollout: ICEMA cuts construction equipment growth forecast to 5%

In existing tax system, around 50% of total construction equipment has a tax incidence of 15%

Construction equipment industry body ICEMA on Tuesday cut growth forecast for the sector to five per cent from 20 per cent for the ongoing financial year saying higher GST rate and cheaper imports under the new tax regime will affect sales.

According to Indian Construction Equipment Manufactures' Association (ICEMA), under the GST 80 per cent of construction equipment machinery has been put under 28 per cent tax slab while the remaining will be taxed at 18 per cent.

In the existing tax system, around 50 per cent of the total construction equipment has a tax incidence of 15 per cent, while around 30 per cent has 18 per cent rate, and the remaining 20 per cent around 28 per cent.

"The majority of vehicles that contribute to the overall sales of construction equipment in India such as backhoe loader and excavator will now be taxed at 28 per cent. In the short term there will be cash flow issues and sales are likely to be affected by 10-15 per cent," ICEMA President Anand Sundaresan told PTI.

He said what is more worrisome for the industry is that under the GST regime imported construction equipment, a majority of which comes from China, will become cheaper and it will hurt domestic industry in the long run.

"Under the GST regime, the government has allowed taking tax credit on imported construction equipment, which wasn't the case earlier. This will lead to reduction in the landed cost," Sundaresan said.

As a result imported construction equipment will become much cheaper and domestic manufacturers will struggle.

"So keeping in mind both the short term and long term impact of GST, our assessment is that this year the industry will grow only around five per cent. We were expecting it to grow around 15-20 per cent earlier," he said.

In 2016-17, the industry posted sales of around 70,000 units at a growth of 25 per cent.

Sundaresan hoped the government will take a relook at the GST rate for the construction equipment industry keeping in mind the interest of domestic manufacturers.