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Budget Wishlist | Tax relief on consumer durables for rural folk: Godrej Appliances

Budget Wishlist | Tax relief on consumer durables for rural folk: Godrej Appliances
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First Published: Mon, Feb 18 2008. 02 51 PM IST

George Menezes, chief operating officer, Godrej Appliances Ltd
George Menezes, chief operating officer, Godrej Appliances Ltd
Updated: Mon, Feb 18 2008. 02 51 PM IST
George Menezes, chief operating officer, Godrej Appliances Ltd
Mumbai: There has been a significant slow down in growth as evident from the GDP and IIP indices, which have dipped significantly in the current year. Consumer durables manufacturing, has seen negative growth rate throughout the year barring the months of April and October, with a small positive change in December. Cooling products, which take up a huge chunk of the white goods category, have borne the brunt of the slowdown more recently, with the extended cold wave dampening purchases.
Among the factors that have contributed to the decline in the consumer durables industry, two deserve special attention. First, hardening interest rates have adversely affected buying behaviour. Second, there has been a substantial dip in exports due to the depreciating dollar.
Given this situation, it becomes an absolute imperative for the government and industry to take necessary steps to propel growth.
Recommendations
Our expectations are as under:
• A favourable excise regime that entails an overall drop in duties from the current 16% to around 8%.
• Initiatives taken by the industry to make the appliances (a) more energy efficient and (b) environment friendly be encouraged with a differential excise duty structure. For example, products with higher energy efficiency should attract lower excise duty. This will motivate the manufacturer, as well as incentivize customers, to go in for energy efficient / environment-friendly appliances.
• To encourage domestic manufacturing it is necessary to bring down the peak import duty on raw materials from current 7.5% to 2%.
• It will be desirable to have a lower excise structure for mass products vis-à-vis the premium products e.g. single-door direct-cool refrigerator should attract lower duty than double-door frost-free refrigerator. This is necessary considering that in the last few years, growth of the mass products have been sluggish while the premium products have been galloping at a higher rate.
• Given the very low credit penetration in the rural market, it is desirable for government bodies such as Nabard to come out with attractive financing schemes to propel growth in this sector.
• In order to improve penetration of consumer durable categories in the rural market and to make products affordable to this class of society, it is worth considering tax exemption for the rural markets.
• Given the poor road infrastructure of the country, all appliance manufacturers suffer from a high rate of damages in transit, which ultimately gets sold at a negative contribution. Therefore, to partly offset this impact, it is recommended that damaged category appliances sold be exempted from all taxes.
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First Published: Mon, Feb 18 2008. 02 51 PM IST