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 the high rate of goods and services tax (IGST) and rupee depreciation have eroded their margins. The payment of integrated GST in advance has further added to the woes of the industry. “The industry is passing through difficult times. The 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 about 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. An additional 5-7% goes towards clearing and transport expenses,” says Hemchandra Yadav, vice president, KTA.