Must Knows

GST on furniture

[ecis2016.org] If you are in the business of producing furniture, you will be required to pay GST on an individual basis for each material that you acquire.

The Goods and Services Tax (GST) tax system began operating on July 1, 2017, and is governed by the GST Council of India. It introduces a significant amount of change to the indirect tax structure. This central tax is charged on almost all items and services in the nation including furniture, with a few notable exceptions. 

Wooden furniture GST rate applicable

If you are in the business of producing furniture, you will be required to pay GST on an individual basis for each material that you acquire. Under the Goods and Services Tax (GST) system, the relevant tax rate for completed wooden furniture is 12%. Plywood is often used in the construction of wooden furniture. When it comes to plywood, the GST, which is now in effect, is 28%, which is far more than the previous VAT rate of 5 or 6%. The high cost of the GST on plywood has resulted in an increase in the price of wooden furniture. Companies that produce furniture out of wood may claim an input tax credit (ITC) on the GST paid for plywood.

Particulars  GST on Furniture  VAT
Wood in the form of chips, sawdust, and wood waste 5% Average 4-5%
Wooden furnishings and ornaments, including tableware and kitchenware 12% Average 12.5%
Wood pulp and bamboo pulp 12% Average 4-5%
Wood used to manufacture umbrellas, walking sticks, wooden boxes, drums, and tool handles, among other related products. 12% Average 4-5%
Residual lyes from wood pulp production; chemically treated wood, containing lignin sulfonates (excluding tall oil) 18% Average 4-5%
Wood tar, vegetable pitch, wood naphtha, brewers’ pitch, wood tar oils; wood preparations derived from resin, resin acids, or vegetable pitch and wood creosote. 18% Average 4-5%
Fiber wood, plywood, and laminated wood, as well as materials that resemble wood or are woody in character. 28% Plywood  5-6% 

Others Average 12.5%

Cane furniture 28 % Average 4-5%
Wood charcoal or firewood  Exempt  Exempt 

After applying these rates, you will be able to establish the prices of your items in accordance with the requirements imposed by the government. Keep a close check on the claims that are legally permissible for you to submit.

Iron and steel furniture manufacturer 

Under GST, except wooden furniture, all other types of furniture are subject to a 28% tax. In contrast to the ordinary VAT rate of 5%, iron and steel will be subject to an 18% GST, regardless of the iron or steel’s characteristics. ITC is provided to producers at the rate of 18% of iron or steel imported under GST. 

Example 

A  bought a steel almirah from XYZ furniture for Rs 50,000. A substantial division of XYZ furniture is dedicated to creating iron and steel furniture exclusively. XYZ had acquired and used steel worth Rs 30,000 for the furniture construction.

Taxable status:

VAT

Particulars  Amount 
Applicable VAT on the Table (X) Rs 6,250 (12.5% of Rs 50,000)
Available ITC on raw materials (Y) Rs 1,250 (5% of Rs 25,000)
Total Tax Liability (X-Y) Rs 5,000

GST 

Particulars  Amount 
Applicable GST on the table (X) Rs 14,000 (28% of Rs 50,000)
Available ITC on raw materials (Y) Rs 4,500 (18% of Rs 25,000)
Total tax liability (X-Y) Rs 9,500

Effect of GST on furniture industry 

When compared to the VAT tax rates, the tax rate on wood, iron, and steel under the GST is much greater. The price of the furniture that is constructed using these materials has gone up as a direct result. When compared to the tax burden associated with the production of wood, the tax liability associated with the production of steel and iron is substantially larger. It is safe to argue that makers of wooden furniture gain more under the Goods and Services Tax (GST) system than manufacturers of iron and steel furniture do.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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