Ten days post GST, our biggest tax reform, confusion continues to flummox customers
Ten days into July, Goods and Services Tax (GST) continue to hog the headlines for one reason or the other. There’s no denying the fact that GST has turned out to be the biggest reform measure notwithstanding the glitches, limitations and uneasiness in several quarters.
While confusion in billing continue to flummox customers at some retail outlets, several companies passing on lower tax
incidence to consumers has dominated the narrative. For instance, most automobile companies have announced price cuts on cars ranging from luxury, mid-segment to small cars. Several automobile companies reported double digit growth in sales in last few weeks ahead of the GST becoming
operative. Most interestingly, this trend continues, as GST has been used as an
effective marketing tool to perk up demand.
A range of consumer goods, food and groceries items have reported healthy growth in sales last few weeks and 10 days post-GST. If the trend continues, consumption led growth may perk up the economic sentiment that has not been so positive in several quarters.
Interestingly enough, prices of very few products have reportedly gone up. But, services across the spectrum have become expensive ranging from banking, insurance to telecom services. Impact of expensive services combined with goods sold at lower rates will be known only mid-next month when the first set of returns were filed by the business establishments registered with GST networks.
What should come as a big relief for those plying the roads was the missing huge queues of trucks at sales tax check posts for getting their waybills cleared. With over 22 states dismantling the regressive check posts, six others expected to join the bandwagon this week, smooth movement of goods has become a virtual reality. Seven union territories joining the GST network has only smoothened the indirect tax levy further.
The biggest redeeming feature was Jammu & Kashmir legislative assembly’s nod to GST, despite some raking up the Article 370 and special powers bogey. This goes a long way in achieving one tax-one nation objective. Unruly scenes, hurling mikes, fisticuffs in the legislative assembly, demonstrations across the Kashmir valley and traders hitting the road had put a question mark on Jammu & Kashmir joining the single levy regime. Late realisation that getting isolated from GST would deal a death knell on their trade interests, Kashmir people rightly decided to fall in line. Separatists calls and a handful of committed azadi elements provocation have effectively been set aside given the fact that GST Council was truly federal in nature and states enjoyed equitable powers on rates, bracketing commodities and dispute settlement mechanism.
But, confusion on several issues continue to confound the taxation authorities. For instance, should the import of foreign currency be taxed at 12 per cent as Integrated Goods and Services Tax (IGST)? If the customs department continues to tax currency, then goods and services being imported for export markets would be impacted. Also, those buying foreign currency for foreign travel on education, health treatments, business and pleasure trips will have to fork out more rupees.
Reports also suggested that taxation authorities continue to be perplexed in dealing with ingenuity of businesses to escape higher tax incidence. Given that the footwear costing up to Rs 500 attract 5 per cent GST as against 18 per cent above this threshold, businesses splitting bills has left tax authorities wondering on how to tackle the menace. Similarly, bill splitting has become a issue in apparels given that items priced below Rs 1,000 attracted 5 per cent GST. Tackling sale of agricultural commodities without tax incidence after withdrawing brand registration posed a problem for the government. Government will have to provide effective counters to these issues as well.