The Hindu Business Line : 20 more items come under Fifth Schedule of KGST

THE State Government has issued a notification bringing under the purview of the Fifth Schedule of the Kerala General Sales Tax (KGST) a list of 20 more products.

Announcing this, a spokesman said here that the two-stage tax is being evolved with a view to pre-empting the practice of undervaluing the product at the first point of sale as per the extant system of taxation, leading to loss in tax revenue.

The new system has been introduced following a survey of 85 commonly used but high-value products that revealed variation ranging from 40 per cent to 100 per cent in the price charged at the first point of sale and that collected from the consumer.

A list of 20 products that reported the maximum variation had already been recommended for being shifted to the Fifth Schedule. This provision now finds a reference in the Finance Bill for the next financial year, the spokesman said.

These products will attract sales tax both at the first and last points of sale. But there will be no upward revision in the incidence of such tax; only, it has been bifurcated.

For instance, for electronic goods that attract 8 per cent tax, the incidence will be 6 per cent at the first point of sale and 2 per cent at the last. There will not be any effective rise in the price of the product, the spokesman said.

The clarification comes in the background of the All Kerala Chemists and Druggists Association (AKCDA) having threatened to call a bandh from March 10 to protest the shifting of medicines to the Fifth Schedule.

According to the spokesman, however, none of the merchants who need to either register under the extant Sales Tax Act or pay a tax would incur any new burden as a result of the new dispensation. As per the extant rules, merchants with annual turnover exceeding Rest 1 lakh only need to register and those exceeding Rest 2 lakh, pay tax.

Also, since medicines provide for a profit margin ranging from 20 per cent to 40 per cent, their shifting to the Fifth Schedule would not bring any additional burden on the merchants.

The State Civil Supplies Corporation has been making available medicines at a price much less than what they sell at the vendors' end. This is because the corporation always to look to pass the maximum benefit possible to the end customer, the spokesman said.

The AKCDA had said that the very purpose of the move to shift medicines to the Fifth Schedule would be defeated since 30 per cent of the pharmaceutical business has come to be carried out by hospitals and doctors who stock and sell medicines without attracting the provisions of the KGST.