Toy industry raises concern over GST

The Indian toy industry, which is facing hurdles due to illegal import of toys from China, has another barrier to overcome this time — in the form of GST rates.

The recently held GST Council meet has approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods. While toys like tricycles, scooters and pedal cars, among others (including parts and accessories thereof) come under 12% tax bracket, electronic toys including parts and accessories thereof fall under the 18% tax bracket.

“Apart from these, educational games like scrabble, and chess and monopoly, fall under 28% bracket. Currently, this category is exempt from tax,” Vivek Jhangiani from the All India Toy Manufacturers’ Association (AITMA) told DH.

With this three-rate structure, toys are going to become expensive. “If somebody purchases three different types of toys, then three different invoices have to be given, and it’s going to create a lot of confusion,” he said, adding, “With the new tax slab, a normal chess set will be expensive by 15% to 20%, and so will scrabble and monopoly games,” he said.

Jhangiani questioned why board games are being considered as luxury.

 “Toys and board games should be clubbed as one rate,” he said. At present, there is a lot of dispute over what should be considered as electronic toys. “Currently, the weighted average tax rate of toys and games stands around 6.5%. If toys fall under one category and one rate, weighted average of 12% is reasonable. Also, states levy different tax for electronic toys,” he added.

Ishmeet Singh, Country Manager (India) at Mattel — an American toy manufacturing company — said, “Increase in the overall tax rate and multiple rates within the toy category will certainly impact the toy industry. Toys and games come with an intrinsic value that adds to the overall learning and development of children, a fact which was recognised in the existing tax structure by exemption or rebate on excise duty. They are now burdened with an unfair and high taxation of up to 28%.”

“If implemented, this is bound to raise prices and impact the purchasing by parents and children,” he added. The size of the retail toy industry is Rs 2,000 crore, of which, the domestic market constitutes Rs 300 crore. The industry largely consists of small and medium enterprises and only 10% of the market is served by Indian manufacturers, and the rest by imports mainly from China.

“The industry, last year, in value terms, grew 7% to 10%, and if you look at inflation, there was no growth at all. Already, the toy industry is facing competition from online games,” said Jhangiani.