Demand for Timber Decreases Due to High GST Rate of 18%

Kutch has been the largest conversion zone for imported timber in Asia. Due to the reduced demand for timber, various sawmills have been forced to cut down on their production. Rupee depreciation and high integrated GST (IGST) has resulted in decreasing the marginal profits for sawmills and plywood makers.

The President of the Kandla Timber Association (KTA), Navneet Gujjar, mentioned that the slowness in real estate, decrease in the value of rupee, and a high GST rate has further added to the misery of the timber industry. He also mentioned that the demand for wood as well as wooden articles has reduced by 20% to 30%.

Currently, the timber industry is worried about the high GST charges in addition to the declining demand for wood. Recently, KTA requested Nirmala Sitharaman, the Union Finance Minister to bring down the IGST to 5%. As of today, 18% IGST is being charged on imported timber. Industry players think that the advance IGST payment is impacting the available funds.

Also Read: GST Revenue Collection Declines by 5.3% in October

Currently, a timber importer has to pay 18% IGST on the vessel’s arrival at the port. About 25% of the payment needs to be made on opening a letter of credit (LC) to place an import order. Also, an extra 5% to 7% goes in transport and clearing-related expenses.

Concerning the advance IGST payment, The Vice President of KTA, Hemchandra Yadav, mentioned that almost 60% of the import expenses are incurred even before the sawmills receive the raw material. He also added that it takes approximately eight months to manufacture and sell the finished goods via wood logs.

Even the plan to develop a furniture park by the Deendayal Port Trust (DPT) has been put on hold since industry players are hesitant about taking up plots on lease since the rent is high. The timber industry is hoping that the finance ministry is going to render some relief around GST charges concerning wood and wooden articles. 

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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