The Goods & Services Tax does not look so “good” for music services!
It has been a little over 2 years that the GST system came into place. The economy was revolutionised. There may be a dispute in opinion, whether it has reformed the tax reforms of India, however, there is little debate on the fact that the Government didn’t do music a favour!
By imposing 18% GST on musical instruments, the government has made learning of music very expensive. Also, there is no clarity on the classification of musical instruments.
Earlier, some states like Karnataka were charging 15% on musical instruments but after the new GST regime, this rate was then raised uniformly to 28% on nearly all musical instruments. In particular, the so-called western musical instruments like the guitar have become more expensive. Following a public outcry, in November 2017, the Union government subsequently brought this rate down to 17%.
There are two angles to look at the GST rates on musical instruments.
The first perspective has to do with people who want to learn music.
These are people who want to buy musical instruments at a cheaper price. For them, music is about learning and advancing one’s soft skills. Unfortunately, by raising the tax to 28%, the government has made learning music quite expensive. Perhaps it thinks that learning music is an exercise in luxury, hence this steep hike in tax. Even though the rate has come down from 28% to 18%, many people still consider learning music an expensive activity.
The other angle is with regard to the classification of musical instruments.
While indigenous musical instruments are exempt from tax, guitars, and violins are considered western instruments by the tax authorities.
There are other instruments too that are considered western by the GST authorities like accordion, trumpet, cello, clarinet, bagpipe, mouth organ, etc. At the time of rolling out GST for musical instruments, the government had considered Dholki, Ghunghroo, and Tabla under the 28% category. Many music store owners considered this classification as strange. The humble harmonium, which came to India from France, was considered an Indian handcrafted product on the other hand.
This incongruity affects the pricing of these instruments as well. For example, a guitar or a violin made in India will still attract a tax of 18% because of its classification. This pricing mechanism is not just putting off a lot of retail buyers but the retailers as well. Margins are falling down and sales volumes aren’t picking up, thanks to this unhelpful pricing.
Now look at this anomaly; while a dhol or a damru will not have any GST, a guitar would definitely attract this tax. But this form of taxation defeats the purpose of GST which is based on the principle of minimum exemptions. When you exempt a large number of items from GST, essentially you are making the other products more expensive. And this is the biggest anomaly of the present GST regime on musical instruments.
The 18% GST on musical instruments is also affecting the sales of spare parts. Many music lovers have to buy their spare parts from abroad because, in India, these parts are more expensive.
List of indigenous handcrafted musical instruments exempt from GST
1. Dotor, Dotara, Dotora
For the complete list, you may like to visit this website: http://thegstguru.com/clay-idols-now-exempt-gst-list-indigenous-handmade-musical-instruments-recommended-nil-rate-gst/
Has the imposition of GST on musical goods affected their sales negatively?
Well, we don’t have empirical data for a specific answer but a Reuters report says that the electric guitar market in India is expected to grow significantly. Even though the penetration of this instrument in India is very low, according to this report, the guitar market is expected to do quite well here over the years. However, the sales for classical instruments such as Veena, Tabla haven’t been keeping up with the changing music preferences.
In an attempt to revive the Indian culture and arts, the Government could classify certain traditional instruments like the ones exempted from the heavy GST rates.
For now, there is a lot of confusion among music instrument sellers regarding the classification of instruments. The rates haven’t been consistent for the previous months, the highly impractical imposed 28% GST has been peeled off to 18% as per the current GST rates.