Toy manufacturer and exporter Amitabh Kharbanda might not have faced the slowdown heat, nor did he have to lay off employees, but the domestic tax structure and policies are now giving him sleepless nights.
The reason is not far to seek: the differential structure of value-added tax (VAT) have rendered the Indian toy industry, which is dominated by the micro, small and medium enterprises (MSMEs), costlier than the cheap Chinese competition that has taken the market by storm.
“There was no visible effect of slowdown on toy industries, but certain tax and policy issues are making us uncompetitive with cheaper Chinese toys,” said Kharbanda, director, Sunlord Toys, Greater-Noida ."Electronic toys are in maximum demand, but government treats electronic and non-electronic toys as two different entities, and thereby imposes value-added tax at 12.5% and 5% respectively, which acts as a deterrent," he said.
Indian toy makers manage to meet about 30% of the domestic demand; the rest is met by the Chinese toys.
“There is an anomaly —importing of toys attract 10% duty, whereas importing raw materials for domestic manufacturing attracts 10% duty and 12.5% countervailing duty, making domestic production costlier,” said Manu Gupta, general secretary, Toy Association of India (TAI).
“There needs to be a level-playing field for us against the imported toys and moreover, there is no strict norm to prevent cheaper and poor quality Chinese toys from entering Indian market,” Gupta said.
The association wants that like Gujarat, Rajasthan and Haryana, other states should also exempt toys from imposing VAT, as toys are used by children and are meant for educational purpose.