Asia’s biggest notified Imported Timber Conversion Zone in Kutch is facing a struggle. Reduction in demand has forced several sawmills to cut production, while high rate of goods and services tax (IGST) and rupee depreciation have eroded their margins. Payment of integrated GST in advance has further added to the woes of the industry.
“The industry is passing through difficult times. Slowdown in real estate, high GST and depreciation in value of the rupee have wiped out our profits,” says Navneet Gujjar, president, Kandla Timber Association (KTA).
The demand for wood and wooden articles has plummeted by 20-30%, prompting sawmills and plywood makers to cut production in tandem with the decline in demand.
Apart from demand reduction, high GST is something that is worrying the industry at present. 18% IGST is levied on timber imported to the country. KTA has recently requested Union finance minister Nirmala Sitharaman to reduce the rate to 5%.
According to industry players, advance payment of IGST is eating into available funds, which is also bothering the industry that provides direct and indirect employment to 1 lakh individuals.
“Timber importers are required to pay 18% IGST when the vessel arrives at port. Around 25% payment is required to be made when a letter of credit (LC) is opened for placing an import order. Additional 5-7% goes towards clearing and transport expenses,” says Hemchandra Yadav, vice president, KTA.
Stating that nearly 60% of the import cost is incurred before the raw material reaches the sawmills, Yadav adds, “How can we survive by paying two-thirds cost in advance? As against this, it takes eight months to ready and sell the finished products from wood logs.” The industry has asked the commerce ministry to provide some relief with regard to GST payment.
Nearly 70% of India’s timber imports is done through ports in Kandla and Mundra. Since 1985, India’s largest timber cluster has come up within a radius of 15 km surrounding Deendayal Port, previously known as Kandla Port. This industrial belt stretches between Gandhidham and Anjar.
The plan of Deendayal Port Trust (DPT) to develop a furniture park in the region has also hit a roadblock as industry players are reluctant to take up plots on lease due to high rent.