Skip to main content

A week of GST: Bumpy ride due to late info overload

A man looks for a book on GST at a shop in Coimbatore ahead of the roll-out of the new tax regime on July 1

More than lack of awareness, information overload after the roll-out of the goods and services tax (GST) is making the transition to the new indirect tax regime tough, according to a top consultant dealing with clients across sectors.

Classes and tutorials, both physical and online, to make people understand the tax system should have started months before the launch, rather than after, the consultant argued. Anita Rastogi, partner, indirect tax and GST, PwC India, said, “It was not a good first week…. We had expected turmoil but what we saw was much more than that.”

Adding to the confusion were statements and notifications flowing out of several ministries and government departments, another person closely associated with the GST processes told Business Standard.A recent consumer affairs ministry notification saying old stocks can be sold with a new maximum retail price (MRP) and the complex steps involved for that is one such example that many are citing. The finance ministry should have been the only nodal body dealing with announcements related to the new taxation system, he pointed out. According to Bipin Sapra, tax partner at EY, “While business transactions have happened unhampered in the week after initiation, dealers are now comprehending the full impact of GST. Uncertain interpretations of rates and law are creating some anxiety.”

Wrong invoices being raised by merchants and dealers were some of the things that consultants had not budgeted for. “My car got damaged and it was taken to a workshop. But it took four days to raise an invoice,” a GST specialist said.

In many cases, the guidance given by the government earlier to tax experts and consultants is now being contradicted by the recently started Twitter handle of the government. “Interpretation of the law is changing every day,” said one such expert, who had expected to be less loaded with GST work after the July 1 roll-out. “On the contrary, our workload has gone up many times as clients, especially the mid-sized firms, are grappling with enforcing the GST.”

Over the weekend, many shoppers, some even in big cities, got a feel of the GST when they were told goods were being sold at discounts as the new tax was not being imposed. The reality was they were not GSTready, a retailer pointed out. The government has focused more on the speed of implementation than on quality, another person linked to the roll-out said.

One of the biggest impact was being felt by the Rs 3.2 lakh crore FMCG sector. Despite its small SKU (shelf-keeping unit) sizes, destocking of old stocks was on full swing during June. Now, companies face the challenge of restocking the trade with products carrying new MRPs. Around 15 to 20 per cent of trade partners like wholesalers and retailers are yet to register under the GST and put in place a system of filing returns, analysts said. According to estimates by Edelweiss, revenue and growth in profit could witness a slowdown.

Praveen Khandelwal, secretary general, Confederation of All India Traders, said the trading community had successfully adopted the GST, though he added that there were many concerns related to lack of knowledge on the fundamentals of the taxation system. The first nine months would be critical, he said, while pressing for government subsidy for traders going digital. A trader, who did not want to be named, said, “If the government assists small and medium businesses in the form of subsidies to make a transition to the new system, the revenue secretary’s master class (recently started GST lessons) may not be needed.”

On a more practical note, an executive from a consumer durable company said it would be important for the dust to settle before mid-August, when the festive season begins. The sector gets at least 40 per cent of its yearly sales during the festive months. As for penalties and legal action on offenders, PwC’s Rastogi said, “The government must be very, very lenient during the first quarter.”

Business Standard, New Delhi, 10th July 2017


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…