Taxes have nearly doubled for furniture and plywood manufacturers after the introduction of the Goods and Services Tax or GST. At 28 per cent, general furniture and plywood goods, earlier taxed between 12 per cent and 14 per cent, now fall in the highest tax bracket.
There are over 3,000 plywood manufacturing units in the country, with over 300 located in Punjab that employ some 40,000 people directly. A majority of the plywood and furniture manufacturers come under the category of small and medium enterprises or SMEs; however, the manufacturers say taxing furniture as a luxury product has put a lot of strain on their finances.
“Our demand after GST is only 50 per cent. Over 80 per cent of the units are small-scale. How will they ever be able to pay 28 per cent tax?” said Inderjit Sohal, president of the Punjab Plywood Manufacturers’ Association.
“Big importers of wood comprise less than 10 per cent of the total plywood and furniture sector. Also, furniture today is a basic necessity. How can they consider it a luxury?” Mr Sohal said.
A majority of labourers in Punjab’s plywood factories are migrants from Bihar and Uttar Pradesh, and a slump in consumer demand has affected them.
“I had many friends from my village working here before, now they have all left. Our factory work has reduced significantly. A 12-hour shift is now hardly six hours, so where will one get money from?” said Kishan Kumar, 33, a labourer. “I feel insecure about my future. I have already sent my family back to Bihar because I don’t have any money,” he said.
Over a third of Punjab’s farmers play an important role as primary producers of agro-wood such as poplar and eucalyptus in the furniture supply chain. Now, the fall in demand has hurt them as well.
“Our rates for plantation wood have become one-fourth of what they used to be since demand has fallen. We are being forced to wean away from plantations now and produce vegetables because of the pressure and our losses,” said Balwant Singh, a poplar farmer in Hoshiarpur.
Large players and big retailers in the furniture supply chain, however, have welcomed the GST; they say imports have become cheaper than domestic produce.
“The government has been trying for GST for many years and it’s been successful over the world, so this is a good step for our country. But there’s an irony. Imports have become cheaper, as with 10 per cent customs and 28 per cent GST, we will now have 38 per cent on imports, whereas earlier the total tax was 42 per cent,” said Rajinder Singh, a furniture importer at Bhagwan Das Market in Punjab’s Ludhiana.
“But when we look at the domestic market, our earlier taxes were 14 per cent, now it is 28 per cent under GST,” said Mr Singh.
Another furniture retailer, Rajiv Singh, who runs a store in Mohali, said he is not against the GST, but the rate is too high. “Normally, till Raksha Bandhan, I would get many orders, but this year not a single one so far,” he said.