Increased tariffs will see knock-on affect in India cosmetics market

24-Sep-2013 - Last updated on 24-Sep-2013 at 14:45 GMT

The Assam government in north-eastern India has increased VAT on cosmetics from 12.5 to 13.5 per cent, which regional industry experts reckon will trigger a knock on effect in terms of price despite the rise only being that of one per cent.

The state body increased the tariff across 43 industries including cosmetics, which has received negative feedback from the likes of the Federation of Industry and Commerce of the North East Region (FINER).

Its chairman R S Joshi spoke out last week about the move being unjust as the country is already seeing an economic slow-down and fighting with price rise.

"This increment will add to cost and price escalation and this additional burden of tax will make bigger hole in the pocket of general public," the Business Standard reported.

Rise in duty tax on plastics could also be on the cards...

Meanwhile, the All India Plastic Manufacturers Association has been putting pressure on the government to raise the tariff on imported plastic products so that the segment can continue to prosper.

In a memorandum sent to Finance Minister P Chidambaram, the Association proposes that the increase in the duty be to a minimum of 20 per cent, as the sector comprises over 50,000 units, 90 per cent of which are in the SME segment, which employs over 4 million workers.

It goes on to highlight that with polymer raw material prices increasing as much as 30 per cent, the small and medium enterprises are the ones facing huge shortage of working capital.

Therefore; in this instance the IPMA has requested the government enhance the sanctioned working capital of SMEs by 30 per cent on ad hoc basis to enable them to overcome the financial crunch and continue the operation, whilst also calling for a roll back duty on all imported raw materials from 7.5 per cent to 5 per cent.

However, analysts still predict Indian market to be lucrative for cosmetics

The news that some of these segments are struggling comes as somewhat of a suprise just months after the Chambers of Commerce and Industry of India (ASSOCHAM) indicated that despite global economic uncertainty, the Indian markets should increase from a current estimate of Rs10,000 crore (US$19.3bn) to Rs 20,000 crore by 2014), paving the way for a successful cosmetics sector.