There was a positive surprise for home improvement sector in last week’s GST Council meeting when it revised downwards GST for Paints, Wall Putty and varnishes from 28% to 18%. Now cement is the only major construction material which attracts GST of 28% while all other construction materials attract lower GST of 18%.
Paint industry was disappointed last year when in November the GST Council decided to reduce the tax rates of several building materials and products in home improvement industry like plywood and ceramic tiles while leaving the rate for Paints at 28%. The association lobbied hard for the rate reduction and at last, the rate was brought at par with other construction materials.
Paint industry is passing through one of its toughest times with the prices of its raw materials going up in recent months. As most of its raw materials are derived from crude the price of which has been on an uptrend in recent months, raw material cost of the paint industry too has gone up considerably. In the first quarter of the current financial year, most of the leading paint makers had raised the price of their products to pass on the increase in the cost of raw materials. So, the government’s decision to reduce GST rate has come as big relief.
Also, reduction in GST rate will help to narrow down the price differential of the products manufactured by the organised and unorganised producers. In paint industry, unorganised manufacturers control as much as 35% of the market. According to some paint manufacturers, last week’s government’s move to reduce GST should hasten the process of shifting of market share from unorganised to organised segment.