The implementation of GST on 18th May 2017 brought significant changes to the Indian furniture industry, valued at USD 28.38 billion. While the new tax regime has led to increased costs for some types of furniture, the availability of Input Tax Credit (ITC) has helped manufacturers offset these costs.
This article will explore the GST rates applicable to various types of furniture, the advantages and disadvantages of GST in this sector, and its overall implications for the industry, helping manufacturers assess the impact on their businesses.
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GST Rate for Different Types of Furniture
The GST rates for furniture vary based on the material used. Wooden and plastic furniture are generally taxed at 18% GST Rate, while steel and other metal furniture attract a 28% GST rate. Understanding these rates is crucial for both manufacturers and consumers as they impact pricing and purchasing decisions.
Material |
GST Rate |
Popular Furniture Choice |
GST Impact |
| Wood | 12% | Plywood, MDF, Teak, Mahogany, etc. | Generally attracts lower GST to maintain affordability |
| Metal | 18% | Steel, Iron, Aluminium, etc. | Higher GST than wood |
| Plastic | 12% | PVC, Polypropylene, Polyethylene, etc. | Standard rate of 12% |
| Upholstery | 18% | Leather, Fabric, etc. | 18% if the base material is not upholstery |
| Glass | 28% | Toughened Glass, Tempered glass, Safety glass, etc. | Highest among common furniture materials |
Now let us understand these in detail:
GST Rates on Wooden Furniture
The standard GST rate applicable to most wooden furniture items, including chairs, tables, wardrobes, and beds, is 12%.
Engineered Wood and Plywood
It’s essential to note that engineered wood and plywood attract a higher GST rate of 28%. This has a significant impact on the overall cost of wooden furniture as these materials are commonly used in furniture manufacturing.
HSN Code for Wooden Furniture
The HSN code for wooden furniture is 9403. This code helps classify different types of wooden furniture for accurate GST calculation.
Now, let’s take a look at the tax rates for different kinds of wooden furniture:
GST Rate |
Type of Wooden Furniture |
| NIL | Firewood or wood charcoal |
| 5% | Wood in chips, sawdust, or waste of wood |
| 12% | Articles like wooden boxes, drums, crates, umbrellas, walking sticks,
Wood pulp, bamboo pulp Wooden furniture such as tableware or kitchenware |
| 18% | Wood tar; vegetable pitch; wood naphtha; brewers’ pitch; wood tar oils Residual lyes from the manufacture of wood pulp, whether or not concentrated, chemically treated, including lignin sulfonate |
| 28% | Fiber Wood, plywood, laminated wood, and other materials having an appearance of wood or being woody in nature |
GST on Steel and Metal Furniture
Steel and metal furniture generally fall under the 18% GST slab. This includes items such as:
- Chairs
- Tables
- Cabinets
- Almirahs
- Office furniture
However, be careful to note that specialized metal equipment or custom-made furniture may fall under a different tax slab. Apart from that, the tax rate may vary if the furniture is made of more than one kind of base material. For example, a glass table with metal legs may attract a higher GST due to the presence of glass (taxed @ 28%) in it.
HSN code for metal furniture is typically 94031010.
GST on Plastic Furniture
Plastic furniture generally attracts a 12% GST rate. This covers a wide range of plastic furniture items, including chairs, tables, storage units, and other household items.
However, keep in mind that the GST rate on furniture made of plastic is subject to change if the furniture is custom-made or has any upholstery (taxed at 18%). Moreover, the tax rate also comes down to the purpose the furniture is used for.
Exemptions and Concessions on Furniture Under GST
While most furniture items are subject to standard GST rates, certain categories may qualify for exemptions or concessions.
Used Furniture
- Potential exemption: Used or second-hand furniture might be exempt from GST or subject to a reduced rate, depending on its condition and resale value.
- State-specific rules: The tax treatment of used furniture can vary across different Indian states.
Furniture Exports
- Zero-rated supply: Furniture exported from India is generally considered a zero-rated supply, meaning no GST is levied. Exporters can claim a refund of input tax credits paid on inputs used in the production of exported furniture.
Government Schemes and Incentives
- Small-scale manufacturers: Certain government schemes might offer tax incentives or subsidies to small-scale furniture manufacturers, indirectly impacting the overall cost of furniture.
- Custom duty concessions: Importers of raw materials used in furniture manufacturing may benefit from customs duty concessions, which can reduce the final cost of the product.
How GST Changed Furniture Taxation: A Pre and Post-GST Analysis
The introduction of GST has significantly reshaped the taxation landscape for the furniture industry.
Pre-GST Era
Before the implementation of GST, the furniture industry was primarily governed by the Value Added Tax (VAT) regime. This resulted in a complex tax structure with varying rates across different states in India. Manufacturers and retailers often faced challenges due to cascading effects of taxes, leading to higher prices for consumers.
Post-GST Era
The introduction of GST brought about the following changes:
- Uniform tax rate: The implementation of a nationwide GST rate of 12% for most furniture items has simplified the tax structure.
- Input Tax Credit (ITC): Manufacturers and dealers can now claim credit for taxes paid on inputs, leading to potential cost savings.
- Increased compliance burden: While GST has simplified the tax structure, it has also increased compliance requirements for businesses.
To illustrate the impact of GST on furniture, let’s consider the following example:
Scenario: A furniture manufacturer produces a wooden chair with a selling price of Rs. 5,000. The cost of raw materials (wood) is Rs. 2,000, and other input costs (like labor, electricity) amount to Rs. 1,500.
Example of Pre-GST Scenario (hypothetical)
- Selling price: Rs. 5,000
- VAT on selling price (assuming 12.5% VAT): Rs. 625
- Input VAT credit on raw materials (assuming 5% VAT): Rs. 100
- Net tax liability: Rs. 525
Example of Post-GST Scenario
- Selling price: Rs. 5,000
- GST on selling price (12%): Rs. 600
- Input Tax Credit (ITC) on raw materials (assuming 18% GST on wood): Rs. 360
- Net GST liability: Rs. 240
As evident from the example, the GST regime introduced a higher tax rate but also allowed for input tax credit, which can partially offset the tax burden.
Impact of GST Rate on Furniture Industry
The implementation of GST on furniture items has brought both challenges and benefits to the furniture industry:
- Increased Transparency: GST has streamlined the tax structure, bringing transparency to pricing and reducing the complexity of tax compliance.
- Cost Implications: The varying GST rates for different types of furniture affect the final price, with metal furniture experiencing higher cost increases due to the 18% rate.
- Market Dynamics: The standardized tax rates have made it easier for businesses to operate across state lines, fostering a more unified national market.
- Competitive Pricing: The elimination of multiple cascading taxes has led to more competitive pricing and has potentially lowered the overall cost burden on manufacturers.
Advantages Of New GST Structure For Furniture
Now that we’ve discussed the overall impact of GST rate on furniture industry, it’s time to go over the advantages of the imposition of GST for furniture:
- Simplified Transaction Values: The GST system has simplified the process of determining transaction values by having a uniform tax rate across states.
- Elimination of Hidden Taxes: With GST, hidden taxes such as excise duty, VAT, and others have been eliminated, leading to clearer pricing and easier GST calculation.
- Cheaper Manufacturing Items: Manufacturers can now claim input tax credits on raw materials, reducing the overall cost of production.
- Creditable Taxes: Businesses can claim credits for taxes paid on inputs, reducing the effective tax rate and promoting more business investments.
- Reduction in Fraud and Corruption: The digital nature of GST has reduced opportunities for tax evasion and corruption.
- Simplified Business Expansion: GST has simplified the process for businesses to expand across state borders, encouraging growth and scale.
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Conclusion
The introduction of GST on furniture has reshaped the furniture industry’s tax landscape, providing both opportunities and challenges for furniture manufacturers. While some types of furniture have seen cost increases due to higher tax rates, the overall simplification and transparency of the tax system have been beneficial for both manufacturers and consumers.
Frequently Asked Questions
Q1. What are GST rate slabs: NIL, 5%, 12%, 18%, and 28%?
GST rate slabs refer to the different categories of tax rates that goods and services are taxed under the GST regime in India. These slabs are NIL or tax-exempt under GST exemption (0%), 5%, 12%, 18%, and 28%, and are determined based on the type of product or service.
Q2. Is GST applicable on used furniture?
Used or second-hand furniture might be exempt from GST or subject to a reduced rate, depending on its condition and resale value.
Q3. What is the GST rate for rental furniture?
The GST rate for rental furniture generally falls under the 18% slab as it is considered a service.
Q4. Can we claim GST on office furniture?
Yes, businesses can claim Input Tax Credit (ITC) on office furniture as long as it is used for business purposes.
Q5. Is ITC allowed on furniture?
Yes, ITC is allowed on furniture purchased for business purposes. This allows businesses to reduce their overall tax liability.
Q6. How is GST applied to modular furniture?
Modular furniture is typically taxed at an 18% GST rate. However, the rate may vary if the furniture includes materials that fall under different tax slabs.
Q7. How does GST impact the cost of furniture for consumers?
GST impacts the cost of furniture for consumers by standardizing the tax rate across different types of furniture. While some furniture may see a cost increase due to higher tax rates, the overall transparency and ability to claim ITC can help manufacturers offset these increases.
Q8. What is the GST rate on custom-made furniture?
Custom-made furniture may attract different GST rates based on the materials used. Typically, it falls under the 18% GST rate, but if it includes materials like glass (taxed at 28%), the overall GST rate may be higher.
