Impact of GST Rate on Furniture Manufacturers

The introduction of Goods and Services Tax (GST) in India has transformed the way industries handle taxation, including the furniture manufacturers. GST is a comprehensive indirect tax that applies to various goods and services, including furniture. Understanding how GST affects furniture manufacturers is crucial for ensuring compliance and optimising tax benefits. 

In this article, we explore the impact of GST rates on furniture manufacturers, covering the different types of furniture, GST slabs, and their implications.

GST Rate for Furniture

The GST rate for furniture varies depending on the material and type of the product. Furniture items fall under HSN Code 9403, with varying GST rates. Here’s a breakdown of the applicable rates:

GST Rate Slabs for Furniture

Furniture manufacturers must know the specific GST slabs that apply to their products. Following are the different slabs for different categories of furniture:

By understanding these slabs, manufacturers can classify their products accurately and ensure the correct GST is applied.

GST on Wooden Furniture

Wooden furniture is one of the most common types of furniture in India. It is generally taxed at an 18% GST rate under HSN Code 9403. However, raw wooden products such as wood chips, sawdust, and wood flour may attract lower GST rates such as 5% or 12%, depending on the category.

Manufacturers must use the correct classification to calculate accurate GST on wooden furniture. For example, the GST rate on raw wooden materials used in furniture manufacturing may be different from the GST on finished product.

GST Rates for Metal and Steel Furniture

Metal and steel furniture, including office chairs, tables, and cabinets, is also taxed at an 18% GST rate. Metal furniture falls under HSN Code 9403.

Due to their durability and material costs, these products have a higher GST rate than other furniture types.

GST on Plastic Furniture

Plastic furniture is popular in the Indian market due to its affordability and durability. Plastic furniture is generally taxed at 12% GST under HSN Code 9403. However, it is essential to classify these products accurately since some plastic-based products may fall under a different GST category.

Manufacturers must monitor their product range carefully to ensure they apply the correct GST rate.

HSN Codes for Furniture

Using the correct HSN codes to ensure accurate GST calculation and compliance is crucial. Here are some common HSN codes for furniture:

• 940310: Metal furniture for offices
• 940320: Other metal furniture
• 940330: Wooden furniture for offices
• 940340: Wooden furniture for kitchens
• 940370: Furniture of plastics
• 940380: Furniture of bamboo, cane, or similar materials

By using the correct HSN codes, manufacturers can avoid errors in tax filings and ensure compliance with GST regulations.

Importance of GST Rates on Furniture and Materials

The GST rates applied to furniture have significant implications for manufacturers. A lower GST rate on raw materials allows manufacturers to save on Input Tax Credit (ITC), which can lower their overall production costs. Conversely, higher GST rates on finished products can increase the selling price, potentially reducing demand.

The GST structure also simplifies tax compliance by replacing a complex system of multiple indirect taxes. This helps manufacturers streamline their operations and reduce administrative costs. However, the rates can also affect the price competitiveness of furniture products, particularly for small manufacturers who may struggle to comply with the tax structure.

Impact of GST on the Furniture Industry

The introduction of GST has had a major impact on the furniture manufacturing industry. Here are some key effects:

• Simplified taxation: GST replaced multiple indirect taxes, such as excise duty and VAT, making the tax structure more straightforward and transparent.
• Input Tax Credit (ITC): Manufacturers can claim ITC on the GST paid on raw materials and capital goods, reducing the overall tax burden.
• Pricing changes: The GST rate affects the final price of furniture. For some manufacturers, the new tax regime may have resulted in lower costs, while higher rates have increased prices for others.
• Compliance and reporting: While GST simplifies the tax structure, it also introduces new compliance requirements. Small manufacturers may find adapting to the more stringent reporting requirements challenging.

Overall, GST significantly impacts the furniture industry, with both positive and negative consequences.