White Goods Firms Brace For Deferred Purchases As Shoppers Await GST Cut

Manufacturers of air-conditioners to televisions are bracing for a lull in demand over the next two months as consumers await a possible GST rate cut from 28% to 18%. Industry executives say revised tax rates, if announced around Diwali in Oct., could spur a surge in purchases later in the festive season, especially when paired with offers and easy financing.

Until formal announcements are made, however, the industry is worried that consumers will defer big-ticket purchases in anticipation of the proposed GST cut, denting demand during the peak sale periods such as Ganesh Chaturthi, Onam and Durga Puja festivals.

As part of GST rationalisaton, the Centre plans to scrap the existing 12% and 28% slab, keeping only 5% and 18% GST rates. The proposed changes may place ACs, TVs above 32 inches and dishwashers in the 18% GST bracket from current 28%, resulting in a 10% price drop in the final bill. Other appliances like refrigerator, washing machine, small-screen TV of 32-inches and below, microwave oven and geyser, are already taxed at 18%.

"Consumers who were planning to buy an AC this month or the next would hold back in wait for cheaper prices," Blue Star managing director B. Thiagarajan told NDTV Profit. There is currently no clarity. "We don't know if there would be any additional cess or whether state governments are on board with the new rates. All eyes remain on how the government merges the GST slabs and when the revised rates take effect," he said, hoping for an early rollout of the anticipated tax relief to boost festive-season sales.

Kamal Nandi, business head and executive vice-president, appliances business at Godrej Enterprises Group also expects demand to be deferred now. "Since the implementation of revised rates is expected around Diwali... coupled with festive offers and easy financing schemes, we expect to see consumption rebound only then."

Retailers, too, echo the sentiment that policy clarity is a prerequisite for sustained activity, and that stocking of goods is tied to the expected tax regime. In a price-conscious market, an early rollout of the new rates in September, they said, could spark a noticeable demand uptick around the festive season, possibly offsetting the sluggish April–June sales.

"Early indicators of festive sales suggest strong consumer sentiment," said Nilesh Gupta, MD at electronic retail chain, Vijay Sales. "A lower tax rate will definitely push festival demand much higher than expected. We await clarity on the revised rates...we are monitoring the developments closely."

For the first time, the central government has announced that next-generation GST reforms to be implemented by Diwali, with the aim of reducing taxes on everyday-use items, while withholding specifics. While the lack of clarity on new rates could slow activity in the immediate term, the move is intended to boost domestic consumption, say executives. It follows measures like an income-tax cut in the budget, and a 1-percentage point cut in interest rate by the Reserve Bank of India in a series earlier this year, aimed to push to consumer demand which has been slow to revive.

A reduction in GST for larger screen sizes above 32 inches under the next generation GST framework can be a "game changer", especially for popular categories like 40”, 43” and 55”, said Arjun Bajaj, director of Videotex, which manufactures TVs for a variety of brands including Lloyd and Realme.

While consumers may postpone their purchases with the possibility of lower taxes ahead, an early announcement of these reforms by the government would help trigger demand and maximise the festive impact when brands also roll out attractive offers to entice buyers, he added.

Industry players have long argued that reducing the GST on white goods, particularly large screen TVs and ACs, is overdue—the current 28% slab is the highest for any developing economy.

"That said, a GST rationalisation would be a historic reform. A reduction of tax will not only improve affordability but also bring India closer to global benchmarks in terms of consumer electronics taxation, and it will help expand penetration into Tier II, III and IV towns," Avneet Singh Marwah, CEO, Super Plastronics Pvt., exclusive brand licensee of Thomson in India.

However, Singh also concurs with his peers. "Amid discussions around a possible GST reduction from 28% to 18%, we believe some consumers are likely to delay their purchases, hoping to benefit from the revised pricing."

If television panels come below the 18% GST slab rate ahead of the festive season, then demand could go higher by 20% year-on-year, he added.