Post GST rate cut paint makers in catch 22 situation

Post GST rate cut paint makers in catch 22 situation

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Paint makers were hoping for GST rate cut but never expected the government to act so soon, which has surprised many in the industry. The government had in the past agreed with the paints industry’s logic for a lower tax rate on the product but the request was supposedly declined on the ground of revenue-protection. So, the recent GST reduction has taken the industry unaware and in fact, thrown their calculations haywire.

Most of the paint makers were planning to go for another price hike as their raw material cost is constantly moving upwards. It may be recalled here that Asian Paints and Berger Paints had hiked the prices of their products in May this year to pass on the increased cost of raw materials. Similarly, Kansai Nerolac had increased the prices in June in two tranches again to compensate increased raw material cost.

Paint makers were planning one more price hike in the next few months, possibly after Monsoon but before the start of festive season to accommodate ever increasing raw material price. However, with the GST rate reduction paint makers may not be able to hike price as it may trigger the anti-profiteering provisions. Now they are placed in a delicate position of balancing between cutting down prices to pass on the tax-cut benefits on one hand, and the need to hike prices to deal with inflationary input costs.

However, some paint makers have already started cutting the prices down to pass on the GST rate reduction to the consumers to avoid the wrath of the government. For example, Kansai Nerolac Paints has passed on the benefit of rate reduction to the consumers by revising the MRP with effect from 27th July. “Kansai Nerolac Paints Ltd, as a good corporate citizen is committed to pass on the benefits of reduction in GST rates to consumers expeditiously,” said the company in a statement.