Widespread thumbs up to GST across sectors, though many await more clarity

Our Bureau New Delhi | Updated on January 11, 2018

Response feeble from small and micro enterprises

A day after the goods and services tax (GST) was rolled out, expert reactions and those from India Inc widely welcomed the indirect tax reform, but were awaiting more clarity on various aspects. Reactions from the technologically weaker micro and small sector enterprises, however, were scarce.

Mukul G Asher, Professorial Fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore, said the inflationary impact of GST, if any, would be minimal.

“The effective (not headline) tax rates will increase on some goods and services, decrease on others. So, households can change purchasing patterns to minimise any adverse impact,” he said.

Commodities with relatively large weight in an average household basket has been levied low rates and agriculture inputs also attract low rates, he said, adding that small businesses with less than Rs 20 lakh annual turnover are exempt and for those up to Rs 75 lakh, a special regime, with low compliance costs will apply. “This will help keep retail prices in check,” Asher said.

Global consultancy PwC saw a mixed bag for the FMCG sector. Anita Rastogi, Partner Indirect Tax and GST, PwC, said: “Clearly, the GST rate structure looks positive for some products, such as soap, toothpaste and hair oil. While tea and coffee may be neutral, aerated beverages and some consumer durables could be more expensive… The rates for ayurvedic products are not as per expectation.”

Sachin Menon, Partner and Head, Indirect Tax at KPMG in India, said GST “like every new born,” may also have teething troubles.

"With 80 per cent goods falling under 12 and 18 per cent bracket leading to fall in prices, the GST will enhance the buying power of the consumers without real increase in their income which will in turn spur demand," he said.

Menon added that now the annual indirect tax budget would no longer be the Finance Ministry’s show, as going forward the central GST budget needs the approval of GST council."

Retailers, too, were upbeat. Govind Shrikhande,Customer Care Associate & Managing Director, Shoppers Stop Ltd, said the impact of GST would be good in the long run for consumers and consumption.

However, he said his company, which sells national and international brands, was “awaiting announcements from the respective brands on the retail price direction and overall impact.”

Representing the hospitality sector, Ritesh Agarwal, Founder & CEO of OYO, noted that there may be challenges in compliance and implementation and hoped that over time, there will be more clarity and familiarity, enabling all stakeholders to adjust, adapt and adhere.

“Already we have seen the GST slab for mid-market hotels revised in response to an industry-wide request for relief. This is a progressive step and will ensure that more businesses come under the tax net and deliver more revenue to the exchequer,” he added.

The solar industry, too, hoped for greater clarity going forward. Sanjeev Aggarwal, MD & CEO, Amplus Energy Solutions, said:

“It is great that many of the broad implications have already been cleared by the Ministry, yet there is a requirement of clarity in operational guidelines as well,” adding that the solar project comprised of many parts and some of them were falling under 5 per cent slab and others in a higher slabs, which may lead to problems in certifications.

Motilal Oswal, CMD, Motilal Oswal Financial Services Ltd, said GST “may disrupt the system for few days, may be weeks or months…Inventory pile-up, reconciliation of stock-in-trade and a host of other issues may create a bottleneck for some time, but in the long term, “this new system will act as a much better taxation grid as it will convert the county into one single market and we will be very clear as to what is the final price available pan-India.”

Published on July 01, 2017

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