The government had originally offered a 15-year sales tax benefit for setting up industry in backward areas, which has now been withdrawn after five years. The benefit has been withdrawn through an amendment in the Central Sales Tax Act.
According to industry estimates, the move will result in AC prices going up by around 12 per cent. The impact may not be felt now as the summer season is almost over, but it is likely to have a bearing in the next season, says an industry expert.
“The AC industry is feeling betrayed and we are exploring legal options available to us,” Refrigeration & Air-conditioning Manufacturers Association president Suneel M Advani told FE.
“The Centre as well as various states have not been friendly to the industry,” he said, adding, “just as when the domestic AC market is beginning to show signs of growth, the government has killed it by withdrawing the sales tax benefit.
Mr Advani pointed out said while on the one side, the government has indirectly withdrawn the exemption granted to them, set up in backward areas, on the other hand, the states are negating the Central sales tax exemption by introducing and entry tax.
Companies such as Voltas Ltd, Blue Star Limited, Carrier Aircon Ltd, Amtrex Hitachi Ltd and LG Electronics are some of the leading members of the association.
“The companies which have a plant in Dadra will be adversely affected and AC prices will go up between Rs 2,000-2,500 per unit, but will be felt only next year,” said an industry paper.