Impact of GST on Domestic Appliances and Electrical Machinery
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October 12, 2017
Taxability on Entertainment and Media Industry under GST
October 24, 2017

Effect of GST on Domestic Appliances and Electrical Machinery

Domestic appliances such as refrigerator, washing machine, chimney, etc. have become a part and parcel of basic necessity. With the evolving consumer lifestyle domestic appliances have now become a part of our lives. Every household has at least some of these domestic appliances for making their daily chores easier.

In this blog, we will discuss the impact of GST on these appliances and GST rates for electrical machinery. Earlier, the average rate of VAT (Value Added Tax) on majority of the household appliance in the states, ranged between 11-12.5%. Excise duty was charged at the rate of 12.5% on the domestic electronic appliances. These goods attract an average total tax at the rate of around 25-26% (including CST and other local taxes).

GST rates for electrical machinery are mentioned in the below table:

Electrical MachineryGST Rates
Hand pumps and its parts, Solar water heater and system, Bio-gas plant, Solar power generating system, Solar power based devices like solar lamps and solar panels, Windmill and wind operated electricity generator5%
Power driven pumps used for flow of water, bicycle pumps, Nuclear fuel elements like uranium and thorium, Sewing machines, Composite machines, Dairy machinery and machinery used for milk production12%
Steam or other vapour generating boilers, Nuclear reactors and fuel elements (cartridges), Central heating boilers, Producer gas or water gas generators, Steam turbines and other vapour turbines, Hydraulic turbines and waterwheels, Turbo propellers and turbojets and other gas turbines turbojets, Industrial or laboratory furnaces and ovens, Machinery for industrial preparation of food and drinks and extraction of animal and vegetable fats18%
Spark ignition combustion piston engine and parts used, Compression ignition combustion piston engine and parts used, Air or vacuum pumps, Air conditioning machines and elements used in machine to change the temperature and humidity, Refrigerators, freezers and any other freezing or refrigerating equipment, Dish-washing machines and other household machines, Fork-lift trucks and other work trucks, Fire extinguishers, Self-propelled bulldozers, road rollers, and other mechanical equipment28%

The prices of the above mentioned electrical machinery are supposed to stay neutral for the end consumer. Handlooms used in the handicraft industry are exceptions; these are charged at NIL rates under GST.

For manufacturers using electrical machinery, it is a win-win situation as they will benefit from input tax credit on the services used that was not the case under VAT.

Tax rate of 28% on basic appliances points towards the fact that manufacturers of domestic appliances such as Samsung, Voltas, etc. may be unable to pass on the benefit of GST to the end consumer. Appliances such as fridge, washing machine fall under the 28% slab. This indicates that the government considers these goods as luxury items. However, prices in cities such as Mumbai will come down as earlier there was an additional octroi of 5 percent on consumer goods, which will not be the case during GST.

Hence, it may be that due to increase in the tax rate, the price of television, air-conditioners may go up. However, the price of commercial electrical machinery is supposed to stay neutral.

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Niteesh Singh
Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.