The recently-announced GST rate reduction on televisions with screen sizes of up to 32 inches from 28 per cent to 18 per cent, and the consequent fall in panel TV prices, will lead to more demand due to higher affordability, according to CRISIL Research.
“We expect players to pass on the majority of the benefits of reduced rates to the customers with maximum retail prices of these appliances likely to fall by 6-8 per cent from their current levels, Rahul Prithiani, Director, CRISIL Research told BusinessLine.
CRISIL expects the overall volume share of the 32-inch segment to increase by 100 bps over the next year, said Prithiani.
The tax-cut will reduce the gap between the prices of TVs below 26-inch — the GST on which was reduced to 18 per cent in July — and 32-inch TVs, and this is likely to shift consumer preference towards the latter, he said.
Avneet Singh Marwah, CEO SPPL, Exclusive Brand Licensee of Thomson in India, said Thomson TV is expecting a 6-8 per cent growth in sales as compared to before, owing to this move. “Whenever this a tax cut in India, the customer sentiments improve and there is a hike in sales,” he said.
Sony foresees this move to “further aggregate the demand for televisions across screen sizes; and not restricted to a particular screen size”, according to Satish Padmanabhan, Sales Head, Sony India. He added that this measure will also positively reflect in Sony’s overall sales growth for the segment.
However, CRISIL is of the opinion that this reduction will not prompt companies to ramp up production. Due to lack of major manufacturing facilities in the domestic market currently, GST reduction is unlikely to have a major impact on domestic production, said Prithiani.
The prevalence of the grey market can be mitigated due to this GST reduction, according to Marwah. “Because the GST was at a high rate of 28 per cent, these players in the grey market were billing to the retailers at the tax rate of 18 per cent for the SKDs (semi-knockdowns), and not at the required 28 per cent. This was a huge scam, and the government has lost a lot of money due to this. Now, after this corrective measure, there will be a healthy and equal competition,” he said.