Companies expect demand boost after 10% GST cut on AC, TV, dishwashers

Electronics and appliances industry may close the year with 20% growth, says one executive

Electronic goods manufacturers on Thursday said they expect demand to boom after the goods and services tax (GST) on air conditioners (ACs), dishwashers and TVs was reduced from 28 per cent to 18 per cent.

 

However, company executives say that customers and retailers are holding back on buying till 22 September as lower rates kick in. 

 

“Lower GST directly stimulates demand for ACs and large TVs, expanding the market size for domestic producers,” said the Ministry of Electronics and Information Technology in a statement on Thursday after the GST council decided to cut taxes on most items of everyday use, premiums on insurance policies and vehicles from September 22.

 

The tax cuts will create “stronger backward linkages” for components such as compressors, displays and semiconductors. They will create more opportunities for micro, small and medium enterprises in plastics, wiring, cooling systems, LED panels, and assembly services, said the ministry. 

 

“Prices will come down by 10 per cent on TVs above 32 inches, ACs, and dishwashers. Currently, customers are holding back on their purchases as they are waiting for the new GST rate to kick in,” said Nilesh Gupta, managing director (MD) at Vijay Sales, which sells consumer electronics and home appliances.

 

Customers have deferred making major purchases since August 15 when Prime Minister Narendra Modi promised measures to boost consumption and GST cuts.

 

“Demand from September 22 will be unprecedented till the end of the year. The industry can now think of closing the year with a 20 per cent growth after the government cut GST rates. Prior to this announcement, we expected the industry to grow by only 10-15 per cent,” said B Thiagarajan, MD of electronics manufacturer Blue Star.

 

He added that many customers will now consider upgrading from a three-star to a five-star AC, triggering significant growth for the industry. 

 

Another company executive said that while big box retailers have continued some amount of buying of stocks, customers and smaller retailers have stopped as they wait for the new GST rates to be implemented.