Bag makers fear tax evasion

The decision to impose a 28 per cent GST on handbags and luggage will increase the price of the products by 10 to 15 per cent. Products like school bags and sports bags also fall under this tax slab.

Last month, the GST Council finalised a four-tier structure for taxation of both goods and services at 5, 12, 18 and 28 per cent. Luggage and handbag manufacturers were hoping bags and luggage to come under the 18 per cent GST rate as they were already paying taxes to the tune of 18 per cent.

There is also a concern that there will be massive tax evasion from unorganised retailers and manufacturers. Soft luggage which is 85 per cent of the market is essentially a textile operation. These products can also be made very easily by small businesses because there is no technology or heavy machinery involved. So for such a product where the tax rate is so high, it will make the product expensive. Because the unorganised sector can make this product very easily, and since half of the market is unorganised, the temptation to evade taxes for the unorganised players at 28 per cent is very high.

Luggage and handbag manufacturers in India include VIP, Samsonite, Safari and Wildcraft.