Calcutta: The paints industry expects to pass on the benefit of a lower GST rate to consumers. The GST Council has decided to lower the rate on paints by 10 per cent at its meeting on Saturday.

While announcing the tweak in the rates on Saturday, Union finance minister Piyush Goyal said the GST on paints and varnishes, including enamel, lacker and putty, has been brought down to 10 per cent from 28 per cent, keeping in mind the demand of the states and to give relief to middle income families.

"The benefits of lower tax rates will be entirely passed on to the consumers. With raw material prices to be hopefully stable in the near term, consumers stand to benefit from the lower GST rates. There will be some deferment of purchase in July but this is temporary. But from August, we expect sales to pick up. This is a welcome move before the festive season," Abhijit Roy, president of the Indian Paints Association, told The Telegraph.

"For the industry, the impact would be in the form of volumes going up as paint becomes more affordable. At the same time, there would be scope for more premiumisation. These bodes well in terms of revenue for the industry," said Roy, who is managing director and CEO of Berger Paints.

The government had kept paint in the highest tax slab for higher revenue. The industry body had urged the GST Council to bring down the rates, arguing that the revenue forgone by the government would be much less compared with the potential of sales going up.

According to industry calculation, the domestic paints industry is estimated at around Rs 50,000 crore. Rationalising the tax rate to 18 per cent would result in an annual loss of around Rs 5,000 crore, translating into a monthly loss of Rs 415 crore. According to the industry, this is negligible compared with an average GST collection of Rs 90,000 crore per month.

"Interestingly, the government sector is one of the major consumer of paints. A lower tax rate would reduce the capital expenditure of the government. Paints also acts as a protective coating which shields surfaces from harsh environmental conditions," said Roy.

Around 75 per cent of the industry is currently organised and the remaining is unorganised. Rationalisation of rates would further encourage sales in the organised sector to go up.