Apex industry body Indian Electrical & Electronics Manufacturers’ Association (IEEMA) has made a representation to Government of India and the GST Council regarding high GST rates on electrical wires and cables (HSN 8544).
In a statement, IEEMA observed that GST rate on the said commodity is 28 per cent, which is twice the tax incidence of 14 per cent in the pre-GST regime.
Given that electric wires and cables have applications in all kinds of projects, IEEMA feels that such high tax incidence could have an overall inflationary effect.
“Since both public and private power utilities and the end users, constituting approximately 70 per cent of the usage of electrical wire and cables do not get any input tax credit, the cost of transmission and distribution of power increases and sets an inflationary trend in the economy,” the release noted.
IEEMA also observed that almost all raw materials used for manufacturing of electrical wires and cables, are taxed at 18 per cent under GST regime. Hence, this huge gap between the rate of tax applicable on inputs and outputs is resulting in an effective increase of 14 per cent in working capital requirement by the manufacturers of electrical wire and cables. This could lead to an increase in the cost of manufacturing, as well as project cost escalation.
“A fair rate of 18 per cent would encourage the use of these products in the rural areas and positively boost the rural electrification agenda of the Government of India, noted Shreegopal Kabra, President, IEEMA.
According to Rakesh Amol, Chairman, Wire & Cables Division, IEEMA, “Electrical Wires and Cables are a necessity for all sectors of economy, and certainly needs to be charged at a lower rate of tax and not at 28 per cent, which is a rate reserved for luxury items and items of prohibitory nature.”
As electricity does not attract GST, there is no input-credit available for electricity companies.
IEEMA has also brought out an anomaly in the input credit aspect of the GST regime, with respect to electricity. According to Sunil Misra, Director General, IEEMA, as electricity is kept out of the GST ambit, no input credit paid on electrical products (raw materials) is available to electricity companies. This means a higher rate of GST is incurred on inputs resulting in higher cost of final product.
“Since the electrical industry supplies equipment for infrastructure development of the country, IEEMA feels that 18 per cent rate of GST should be imposed on all products used for generation, transmission, distribution and consumption of power,” noted Misra.
Photo Courtesy: Leoni AG
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