Book lovers and students will now have to pay more as books will become costlier by 10-20 per cent under the Goods and Services Tax regime.
Though books continue to remain exempt under GST, but inputs such as printing, binding and royalties to authors now attract tax at 12 per cent. Since the publishers don’t get input tax credit, they now propose to pass it on to customers.
“Books are not taxable under GST, but we are at a disadvantage as we lose out on input tax credit. Prices of books will increase by 15 per cent to 20 per cent,” said Amit Bhargava, Director of Taxmann.
The company publishes legal books on topics such as direct and indirect tax laws, banking and company laws that are also used by University students. Starting July 1, it has already hiked prices of books to reflect the changes with GST.
But on the ground, it is unlikely that prices of your favourite bestseller would have increased immediately, although retailers expect a hike in the coming months.
The government has tried to appease the country’s readership base by placing the purchase of the book under GST exempted category. “We had earlier made a representation to the government and it has kindly accepted our suggestion to exempt printed books from GST. The electronic reproduction of the intellectual property will be charged with GST”, informs Sunil Sachdeva, President, The Federation of Publisher’s and Bookseller’s Association in India. This means that a reader will not be paying any GST on the purchase of books. Although the sales of the books are exempted from GST, the cost of book making will go up by 10%-28% (excluding the overheads) and this will be paid directly from the pocket of the publisher because there is no provision to claim Input Tax Credits (ITC) like in erstwhile Value Added Tax (VAT). While the decision is in line to make education easily accessible, the undercurrents of the same are largely unnoticed on the surface.
“The direct production cost of the book will increase in two ways- one with the organised sector of book making and secondly with the disorganised “jobbers” who do not comply under GST. It is clear that with the organised sector, there will be a 5% to 18% increase in the book production cost because the paper, printing ink, lamination, book-making plates and binding will be charged. But, what will happen to the “jobbers” like book -binders, offset printers and lamination service providers whose annual turnover is less than INR 20 lakhs? They will have no option but to close their shops”, said Meera Johri, Publisher, Rajpal and Sons which is a century old publishing house known for publishing APJ Abdul Kalam and Ruskin Bond. Adds Sunil Mehta of Mehta Publishing House, Pune, “Marathi book publishing is very price sensitive. If the cost of production of the books, including GST on royalties, is going to increase by 30%-45%, then I am not sure if the readers will accept this price hike.”
The books that are currently sold between INR 75-INR 99 will now be priced between INR 175- INR 200. The Indian languages publishers publish literary books that are not school or college text books and make for leisure reading. Can a middle class Indian reader accept 100% price hike in pursuit of leisure in India? Can we make up for this increase in book production by increasing the cost of the book”, asks Shailesh Bharatwasi, Publisher of Hind Yugm, a Hindi language publisher based out of New Delhi.
Apart from the cost of production, the operations cost of GST management in the workflow of the publishing house is also set to increase. There will be 36 annual filings, 3 each month in addition to the annual Income Tax submissions each year. “We need a dedicated desk in the office to manage these filings. Honestly, we are not prepared for this”, informs Johri. “I have been running the bookstore with the minimum staff to make the operations self-sufficient since more than 50 years. How will these bills be managed, I don’t know”, adds Anup Kumar, Proprietor of Anupam bookstore of Patna.
The booksellers are worst impacted because Indian languages booksellers work with thin margins and are largely dependent on sales of stationary items that are taxed under the GST making them more expensive. The situation is aggravated with the uneven discount structures in the book distribution. The booksellers settle for ‘trade discount’ that range anywhere between 10%-65%. Unlike the European fixed price policy there is no organsied discount structure for sales of books in India. There have been instances where the publishers have sold their books at costs lower than the production cost due to the scathing discount war, most amplified in the digital domain. What adds to their woes is that fact that the distribution system especially for books in Indian languages is in perennial shambles at various levels of meta-data creation, cataloging, warehousing and on-road distribution.
“The repeat orders of the books have dropped in last three weeks and this will become worse because the transportation of the books will become very expensive. The booksellers who used to stock 300-400 copies of our books are not going to do that now because of the same reason,” explains Esha Chatterjee of Bee Books, Kolkata. Anshul Chawla, Managing Director of UBSPD which is India’s one of the largest online retailer agrees that the transportation bills may increase by 1% -2% and it will be the prerogative of “the publisher to either absorb the increased cost or pass it to the customer.”
The situation in the satellite cities is different from the remote states. The booksellers of the Hindi heartland of Patna are facing the heat because they don’t know whom to address their queries. Says Kumar, “The books have not been delivered since last three weeks. The transporters are not letting us have our bundles of books because we have not received out GST numbers yet. I had applied weeks ago, but have not received any update on my application. We don’t have any clue as to how it will affect our trade, how the billing has to be done. Also, there is no organsiation that is taking the pains to address these questions.” The bookstore has been operating since 1965 and is a landmark among readers and students of Bihar.
“The GST is a great way to streamline the operations and make the data deficit Indian publishing industry look within itself and retrospect, but its implementation needed a more organised plan. It is a strange situation”, said Arun Maheshwari, Chairman and Managing Director, Vani Prakashan. The smaller vendors will be under tremendous pressure. “This policy may not help the Indian languages publishers who are keeping the creativity alive by publishing smaller print runs consistently,” says Bharatwasi. “We are yet to see how will the costs actually change to evaluate the overall impact. But we hope for the best”, said Sachdeva.
Subash Goel, Treasurer, Federation of Educational Publishers in India, said, “We believe that MRP of books could go up by 12-15 per cent as costs of publishers have gone up under the GST regime.” He added the 12 per cent GST being imposed on author royalties will be through reverse charges so publishers will not be able to avail themselves of any input tax credit on this cost.
The GST on royalties is being seen as the biggest challenge by the industry, which will neither help the publisher, the reader or the author.
“When the government is trying to give a thrust to education, this is not favourable development,” said Ashok Gupta, a Chartered Accountant, associated with a publishing house.
GST on paper
Further, paper also attracts GST. For transition stocks from before July 1, publishers and printers will not get any input tax credit on excise duty and central sales tax paid by them.
“There is no set-off for transition stocks and it will add to costs,” said another publisher who did not wish to be identified.
As a special concession for young children, the GST Council had decided to lower the rate on exercise books to 12 per cent from the earlier proposal of 18 per cent and had altogether exempted colouring books used by small children from the tax.
Inputs by Aditi Maheshwari-Goyal