GST On Plant & Machinery Is Not An Impediment In Growth

GST On Plant Machinery Is Not An Impediment In Growth

GST On Plant & Machinery Is Not An Impediment In Growth

 Mr. N.D. Desai, MD of NKR Engineers Pvt. Ltd.

For any country, capital equipment & Machinery manufacturing seems to be the spine of economy. The question after GST regime in India was hovering around that GST may be proved an impediment in 'Make in India' programme. Talking to The Pulp and Paper Times, Mr. N.D. Desai, MD of NKR Engineers said that earlier it (GST) was a stigma for machinery manufactures but post GST it has been removed. Pre and post tax regime doesn't create any major tax difference. Pre GST, if you do interstate purchase, then against Form C you will be paying 2% CST, Excise duty @12.5% and entry tax (depend upon the State, say 4%). Total tax is 18.5%. Out of which cenvatable is 16.5% or 12.5% (without entry tax credit). In GST the rate of 18% has been fixed. If you purchase in GST, 18% would be liable to be paid. You will get full credit on intra state sale. NKR Engineers is a pioneer in supplying pulp and paper plant and Machinery. “18 percent goods and services tax (GST) will reduce tax outgo for capital goods industry. If you look at manufacturing industries the excise incidence is ranging between 12-13 percent right now and including the cess and everything put together it will come to 12-13 percent. 

 Mr. MS Unnikrishnan, MD of Thermax Ltd.

    However, if it is a sale within the same state itself, there is a sales tax incidence of almost varying between 10 and 14 percent depending upon the item that you are manufacturing. So, the cumulative impact - the same states sale  would be in the region of around 24-25 percent. So, if the government were to fix 18 percent as GST rate then that is going to be reducing the total incidence of tax while a purchase is made, that is point number one.” explained by MS Unnikrishnan, MD of Thermax, in an interview to CNBCTV18 before GST. “However, when you are going to make an interstate sale, which is also very regular in the manufacturing industry, which means you manufacture in a state and sell it in another state. So, the excise is remaining constant. The central sales tax as of today is only two percent. So, the cumulative tax is maybe around 15-16 percent on the total sale. Now, when it is going to become 18 percent certainly it is going to have a minor increase in the incidence of tax at the time when a consumer purchases it. So, that is the way one has got to understand same state sale versus interstate sale, but if they are going to be limiting at 18 percent for general rate which should encompass, in my opinion, between 65 and 75 percent of the entire sale that has being done in the country. It is going to be benefitting the industry.” told by Mr. Unnikrishnan.

    When contacted to Mr. Krishna Reddy, MD of Sri Luxmi Tulsi Agro Paper said the being a Paper Manufacturer, if one go in expansion over a period, few thing yet to be confirmed that GST could be used in same year or not is not resolved. There has been increment of 2- 3% in tax on our purchase for plant and machinery after GST. We have ordered the machinery for our fourth PMC from China and to be taxed in 18% slab under IGST. “Even purchasing of plant & machinery could be marginally cheaper as raw material would be taxed on lower rate which is used in manufacturing of capital machinery. Also paper manufacture could avail the GST modvate but earlier 2% CST can't be claimed. Obviously you wish to purchase machinery to enhance your manufacturing capacity or start your business. GST or no GST should not affect your decision.” Mr. Desai said. “Difference betw-een pre and post GST slab may not be passed on to end customer as it could be used as modvate or credit.” Mr. Reddy said.

Published at : Jul 10, 2022 01:45 PM (IST)

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