21 Jul 2017
Post GST implementation, the sport sector will become more organized and hence has a good chance in being recognized as an independent industrial sector; higher tax rate for certain categories will however act as an impediment for the sector
Brief: Sports industry in India is highly labor intensive and is inherently export oriented. The industry’s exports accounts for nearly 0.5% in overall exports. In fact, the industry’s exports (except sport garments) have recorded a solid growth of 8.8% in FY17, when India’s overall export was expanding by just 5.3%. Sport garments, that share 38% in the overall sport export has however contracted by 3% during the said period. This negative growth is owing to higher cotton prices in India as a result of which the industry’s competitiveness suffered.
As of today, this industry is largely dominated by unorganized players and is therefore difficult to access the domestic market size. This may change post implementation of the GST, as the unorganized firms will be compelled to become organized in order to remain in business. As per the value creation map under the new tax regime, any deviation will impact the ITC chain which in turn will be detrimental to the sector’s low capital businesses. Therefore, if successfully implemented and complied, SMERA believes that the new tax structure will significantly help the sport industry in being recognized as an independent industrial sector. However, raising GST rate on some sport goods and sports viewing (luxury tickets) will have a negative impact at least in the short term.
Being the fastest growing major economy, India is moving towards an all engulfing sports culture. People are showing cricket like interest in other sports as well and this has spawned several categories; demand for kits, specialized apparel as well as related equipment and media is expected to expand strongly as a result.
Segment wise growth in export(%)
Source: Ministry of Commerce; SMERA Research