Impact of GST Rates on Wooden Furniture in India

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July 2, 2019

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On 18th May 2017, a meeting was held in which the GST council declared the tax on certain goods and services under GST, the new tax regime, which has effectively replaced the existing VAT taxes on goods and services. In this article, you can read about GST rates on various wooden furniture items and supplies and how is the GST regime better (or worse) than the VAT regime.

GST Rates on Wooden Furniture Supplies

To understand the cost of wooden furniture, one should first know the GST rate on the wood product supplies.

  • GST Rate for articles like wooden boxes, drums, crates and the wood used in making an umbrella, walking sticks and tool handles or anything similar is 12%.
  • GST Rate for wood pulp and bamboo pulp is 12%.
  • GST Rate for residual lyes from the manufacturing of wood pulp, whether or not concentrated, desugared or chemically treated, including lignin sulfonates, but excluding tall oil is 18%.
  • GST Rate for wood tar; vegetable pitch; wood naphtha; brewers’ pitch; wood tar oils and similar preparations based on resin, resin acids or on a vegetable pitch and wood creosote is 18%.
  • GST Rate for any wooden furniture and wooden decorates used as tableware or kitchenware (except that notified @28% under GST) is 12%.
  • GST Rate for fiber wood, plywood, laminated wood and other materials having an appearance of wood or being woody in nature is 28%.
  • GST Rate for firewood or wood charcoal is Exempt.
  • GST Rate for wood in chips, sawdust or waste of wood is 5%.
  • GST Rate for cane furniture is 28%.

Instead of the old average VAT rate of 12.5%, the final goods manufactured by the wooden furniture manufacturers will be levied at the rate of 12% under GST. Mainly for the manufacture of wooden furniture articles, plywood is used. A major increase has been made in the rate of plywood from the current average VAT rate of 5-6% to 28% under GST. This has resulted in an increase in the cost of wooden furniture. However, furniture manufacturers can now claim the ITC (input tax credit) on the tax paid for buying plywood.

GST Rate on Iron or Steel Furniture

Iron or steel furniture has also got expensive under GST. The old average VAT rate applicable to iron or steel furniture was 12.5% while under GST, any article of furniture, other than wooden furniture, will be taxable at 28% rate.

As compared to the average VAT rate of 5%, the GST will be levied on iron and steel at the rate of 18%, regardless of the metal characteristics. Manufacturers of iron and steel furniture would be able to claim ITC of the tax paid by them on imports.

Conclusion

The tax rate under GST on furniture, wood, iron or steel is much higher as compared to the older rates of the VAT.

Hence, under GST, there will be an increase in the tax liabilities of iron or steel producers. GST is expected to be more profitable for wooden furniture manufacturers but not so much for iron or steel furniture manufacturers.

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