AC Sales May Halve In Short-Term: Blue Star MD On Proposed GST Reforms

The proposed GST reforms, expected to be rolled out by October, could impact the AC industry in the short term, according to B Thiagarajan, Managing Director, Blue Star. While in the long term it can take the air conditioner industry to a different level, in the short term it will cause some pain due to reduced sales, the top executive predicted.

“GST reduction is a welcome thing and in the long run, it is going to help. In the interim, we will go through some pain. Whoever wanted to buy in the past few days has postponed. August sale will not be there at all,” he said during a conversation with NDTV Profit.

During his Independence Day speech, PM Modi announced “next-generation GST (Goods and Services Tax) reforms” that would reduce the tax burden for the common man. A recent meeting of the Group of Ministers (GoM) on rate rationalisation accepted the Centre’s proposal to reduce the GST slabs to two: 5% and 18%. Once the new GST rates are implemented, air conditioners (ACs) are expected to be taxed at 18%, down from 28% currently. 

The next-generation GST reforms are expected to be launched around Diwali, as mentioned by PM Modi in his address to the nation on Aug. 15.

On being asked about how the AC industry will be impacted till the new rates are implemented, the Blue Star MD predicted a decline of up to 50% in sales.

“If 100 conditioners were to be sold, some 50 may get sold. The balance 50 people would indeed wait for and they are entitled to wait for,” he said.

The industry would benefit if the new rates are notified as soon as possible.

“I wish and pray that these rules and regulations are framed and the final notifications issued before Sept. 1. I doubt very much it will happen; if it happens, it is good, otherwise, there is going to be pain even in September,” the top executive emphasised.

Explaining the rationale for customers to delay the purchase, he said, “Why will you end up buying? You will wait for the final announcement to be made.  The last line in the invoice is the GST; if it is 28%, 28% will be charged, if it is 18%, 18% will be charged.”

The delay could particularly impact the festive season, with major buying periods like Ganesh Chaturthi, Navratri and Diwali at risk. He added that while B2B customers, who benefit from input tax credit, may continue purchasing, individual consumers are likely to wait for the final announcement.

“Dealers will not take any risk at this point. At best, they will be taking bookings from the consumers, saying that GST is going to come down as soon as that announcement is made, I will be able to deliver,” the top executive highlighted.

For FY26, he expects sales in the AC industry to grow by 15%-20%.

“Now the festival season is around the corner and this GST announcement is indeed a welcome one. The industry can bounce back faster and close the year at least with 15-20% growth.”