HYDERABAD: Plastic manufacturers, prior to the rollout of Goods and Service Tax, had expressed their displeasure at the high rate of tax on plastic goods. Now, some plastic scrap dealers are staying off the market fearing higher taxes, albeit temporarily. Those from the industry say that the recycling of plastic could become an unfavourable business now.
“I have put a full stop to my business and have adopted a wait-and-watch approach for now. As for now, there is no movement in the market for plastic scrap.” “I will get back into business only after I fully understand how this will impact me,” said Naveen Kumar, owner of Delta Sourcing, a plastic scrap dealer in the city. He has been advised by his accountant to stay off the business until there is more clarity on GST regulations for his sector.
Prior to GST, recycled plastic was taxed at 5 per cent Value Added Tax (VAT) with no excise duty to be paid, but under GST plastic products will be taxed at 18 and 28 per cent.
“This could result in steep rise in the price of products made out of recycled plastic,” said Vimelesh Gupta, honorary secretary, Telangana and Andhra Plastic Manufacturers Association. “If you look at the overall industry, GST will have a nominal positive impact, he added.
However, those engaged in plastic scrap sale are mainly small traders and rag-pickers earning less than ` 20 lakh a year and are thus exempted from GST. “They have a reason to worry and it is a genuine concern,” said Gupta. In terms of tax compliance, the sector will marginally be saved by reverse charge mechanism,” he added.
“If an unregistered dealer sells goods to a registered dealer, GST will be levied on the registered dealer under the reverse charge mechanism. He can then classify his returns under the reverse charge mechanism and claim the input tax credit” explained Gupta.However, the Central Board of Excise and Customs (CBEC) is yet to issue a list of goods on which reverse charge is applicable under GST. Recycled plastic was eligible for reverse charge prior to GST.
“The goods made out of scrap would thus be priced higher which is not good for the industry. Rag- pickers and small traders will be affected as the price disparity between recycled plastic and virgin polymer will narrow, making the industry to prefer shifting to virgin polymer,” said Gupta.