The ceramic industry of Morbi is staring at a business slowdown in the wake of the imposition of the proposed 28% rate of the goods and services tax (GST) on the sector. Stockists have already applied brakes on new purchases in a bid to neutralise their inventories. Morbi in Gujarat is the third-largest manufacturing hub for ceramics in the world after China and Italy, and accounts for 90% of the total ceramic production in the country. However, in a move to save the industry from a total collapse, Morbi ceramic units are giving a big push to the exports market in the hope that this would help them survive domestic losses. According to sources, exports from Morbi have gone up from Rs 4,000 crore to Rs 6,000 crore in the past one year alone. Himanshu Shah, head of finance at Asian Granito India, said: “Over a period of time ceramic players have made several changes and adopted new technologies such as digital printing and automation to improve quality of products. This has opened the export market for India in a big way. We are now capable of competing with China and Italy internationally.”
The industry has been clamouring for a cut in the GST rate on ceramic items from the proposed 28% to 12%. The ceramic association of Morbi along with manufacturers had also recently met finance minister Arun Jaitley.
“The GST Council has put ceramics in luxury category and imposed 28% tax. This will increase the prices by 42% for end-users. The higher price may lead to a significant reduction in demand and we may lose domestic business to cheaper Chinese imports. After the announcement, stockists are not placing fresh orders as they want to clear old stocks. This has led to a slump in demand by as much as 40% in the recent past,” said K G Kundariya, president of Morbi Ceramic Association.
At present, tax rates in the ceramic industry in Gujarat are pegged at around 17-18%, a major reason why ceramic players are opposing the new rates of GST, as this will not only increase the production costs but also raise the working capital costs by 10-11%.
G G Trivedi, chief executive officer of Somany Ceramics, said: “Ceramic tiles are basically not a luxury item and therefore, the proposed 28% GST rate will seriously affect us. By putting ceramics under luxury items category we are strengthening our competitor.”
By Vimukt Dave