publishing trends

Booksellers and publishers are feeling the heat of GST. Will they pass on the burden to the reader?

For Indian language publishers, the GST is an unruly beast that has to be tamed.

With the introduction of the new Goods and Services Tax (GST), the government has placed books in the zero-tax category. But this, however, does not translate into entirely good news for booksellers and book buyers, as the industry tries to figure out how to adjust to the tax reforms. “We had earlier made a representation to the government and it has kindly accepted our suggestion to exempt printed books from GST,” said Sunil Sachdeva, President, The Federation of Publisher’s and Bookseller’s Association in India. “However, the electronic reproduction of the intellectual property will be charged with GST.”

However, despite this relaxation, the cost of book-making will go up by 10%-28% (excluding the overheads) and this will have to be paid directly by the publisher unless it is passed on to the reader, because there is no provision to claim Input Tax Credits (ITC) – taxes paid by suppliers – like in the erstwhile Value Added Tax (VAT). While the decision may be with the idea of making educational material easily accessible, the subtext, for non-English language publishers, for instance, has been largely unnoticed.

Ask Meera Johri, Publisher, Rajpal and Sons, a century-old publishing house known for publishing Harivansh Rai Bacchan, APJ Abdul Kalam and Ruskin Bond. She said, “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 more expensive. But, what will happen to the ‘jobbers’ like book-binders, offset printers and lamination service providers whose annual turnover is less than Rs 20 lakh? They are huge in number and will have no option but to close shop.”

Added Sunil Mehta of Mehta Publishing House, Pune, “The Marathi books market, for instance, 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.”

Why is it that Indian publishing is viewing GST with mixed feelings? There will be 12%-18% GST on all services and service providers who contribute towards making a book. In addition, there is a flat GST of 18% charged on the royalties paid to the authors, versus 10%-12% TDS earlier. “This is eyewash because the publishers of Indian language books will be forced to increase the cost of the book to recover the increase in the costs of production,” said Shailesh Bharatwasi, publisher of Hindi publishing company Hind Yugm.

“Will the reader benefit in this situation? The books that are currently sold at Rs 75-99 will now be priced at Rs 150-175. Can a middle-class reader accept this deep price hike in pursuit of leisure-reading in India?” Bharatwasi said.

Apart from the cost of production, the operations cost of GST management in the workflow of a publishing house is also set to increase. There will be 36 annual filings, three each month, in addition to the annual Income Tax submissions every year. “We need a dedicated desk to manage these filings. Honestly, we are not prepared for this,” said Johri.

Bookshop pressure

Added Anup Kumar, the proprietor of Anupam Bookstore in Patna, which he has been running since 1965.“For more than 50 years I have been running the bookstore with minimum staff to make the operations self-sufficient. How will these bills be managed? I don’t know.”

Booksellers are the worst impacted also because Indian language bookshops operate on wafer-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 book distribution.

Booksellers settle for a “trade discount” that ranges anywhere between 10% and 65%. Unlike the European fixed price policy, there is no organised discount structure for sales of books in India. There have been instances where the publishers have had to sell their books cheaper than production cost thanks to discount wars, which is most amplified in the digital domain. What adds to their woes is the fact that the distribution system, especially for books in Indian languages, is perennially in a shambles at all levels – meta-data creation, cataloguing, warehousing and on-road distribution.

“Repeat orders for books have dropped in last three weeks and this will become worse because the transportation of the books will become very expensive,” explained Esha Chatterjee of Bee Books, Kolkata. “Booksellers who used to stock 300-400 copies of our books are not going to do that now because of the same reason.”

Anshul Chawla, Managing Director of UBS Publishers Distributers, one of the largest online retailers, agreed that 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.

Added Anupam’s Kumar, “Books have not been delivered for three weeks. The transporters are not letting us take our deliveries because we have not received our 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 organisation that is taking the pains to address these questions.”

The battle in remote areas

The situation in North East India is even more bleak. “Sikkim is cut off in many ways because of the Gorkhaland movement,” said Raman Sreshtha, CEO, Rachna Bookstore, Gangtok. “Bengal is not allowing cargo trucks into Siliguri and beyond. They get vandalised because of Sikkim’s supporting the demand for Gorkhaland. No consignment has arrived in over a month. Limited ration and vegetables get passage into Sikkim. We face a different set of challenges altogether. These are things that don’t affect the nation at large. We fight a different set of battles. And yes, books are an important part of it all.”

It’s not that Indian language publishers are opposed to the GST. Said Arun Maheshwari, Chairman and Managing Director, Vani Prakashan, “The GST is a great way to streamline operations and make the data-deficit Indian publishing industry look within itself and retrospect, but its implementation needed a more organised plan.”

Smaller vendors will be under tremendous pressure. “This policy may not help the Indian language publishers who are keeping creativity alive by publishing smaller print runs of books consistently,” said Bharatwasi. Still, people are waiting to find out the outcome. “We are yet to see how the costs will actually change before we can evaluate the overall impact. But we hope for the best,” said Sachdeva.

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This article was produced by the Scroll marketing team on behalf of Lufthansa as part of their More Indian Than You Think initiative and not by the Scroll editorial team.