The whole tax regime is set to change. How will it affect our lives? For better or worse?
Flooded with SMSes offering washing machines and airconditioners at almost 50 per cent discount, schoolteacher Sarika Grewal, is wondering whether to buy now or wait for GST to sink in. She does urgently need to replace both appliances, as her existing ones are irreparably old
Kiran is 40 and works as a domestic help in Delhi and with less than a week for GST to be implemented, all she wants her employer to tell her, is, whether or not she should hoard rice, dal, and masala.
Rati Gupta, 25 is simply worried about the loan she will need to buy her first car. “Will the car become more expensive? I can’t buy it until August or September – when my office actually gives me a loan.
All three are confused by what they’ve been hearing from various sources on the post-GST regime. “To buy and discover that the item is substantially cheaper a few weeks later, or don’t buy expecting prices to fall, and discover that the item is beyond reach now,” – that’s the quandary most people are in.
At the other end of the spectrum are the retailers. Be it the small kiraana store, or big brand chains, no one knows what is coming. All businesses, be they chemists, grocers, or establishments selling home appliances, they’re all busy looking for someone to tell ‘them’ what to do.
Logic ERP Solutions, for instance, is busy figuring out software for traders and retail shops across North India. Its Managing Director, Swarndeep Singh, sits in a coffee shop in Shimla, patiently explaining the differences between the old regime and the new to a client.
He has this very simple advice for consumers: “if the discount is substantial and it’s something you need (for instance a washing machine or a television), go ahead, and buy it. Masala, rice, and groceries, there’s a limit to how much you can buy and hoard. And, you’ll need to buy them again after a few months in any case, so how much will you save by hoarding?”
Mumbai-based audit consultant Tulika Ruia insists that there can be no generalisations about post GST prices. “It all depends on where you live. If we take the example of cinema tickets, tickets priced at Rs 100 or less will be taxed at 18 per cent and those above Rs 100 will be taxed at 28 per cent. Cinema ticket prices are currently based on entertainment taxes levied by states where theatres are situated.” “So people in zero entertainment tax states like Punjab, Himachal Pradesh, and Uttarakhand will pay much more, but in Uttar Pradesh where the current tax is 60 per cent, people will pay a lot less,” she adds.
Most experts believe that the move will prove beneficial for Indian businesses, and will open up back-end jobs in the retail industry. Tax professionals, software professionals, lawyers, and data auditors will all be needed in much larger numbers to help India adjust to the new regimen
Service Analysis and Consultancy firms have already begun advising their corporate clients that GST specific positions such as Vice President (GST), or Director (GST), will have to become a permanent feature
Since the early bird gets the worm, private business studies colleges have started looking for professors who can teach a GST specific course right away. The principal of a Noida-based institution, who did not wish to be named, said, “For existing batches, we are introducing GST classes, but for future batches, we are identifying people who can create an entire GST specialisation course. The earliest batch of professionals who can master the subtleties of GST implementation will evidently become leaders of the market force in years to come. It is similar to the first lot of computer professionals.
Nevertheless, that still brings us back to the 64 million dollar question: What happens on the first of July. Analysis by groups such as Nomura and CRISIL predict price reduction on several items and increased bills for several services.
Reports and predictions in mid-June suggest that eating out will be cheaper in most states. In spite of claims and protests by the hospitality industry, experts say travel and hotel bills – usually inflated by various state levied taxes are likely to be lower too.
Over the last decade, despite the existence of a Value Added Tax (VAT) regime, in reality, consumers ended up charged for indirect taxes, often twice or thrice for the same item. The government’s decision to set up an agency to enforce the anti-profiteering law means that people will actually get the benefit of GST price reductions.
Ratnesh Kumar, who owns three stores in Delhi selling home appliances, says, “Even if washing machines or food processors become more expensive after GST, life won’t come to a standstill. As a shop owner, I’m also confused about how things will pan out. But we have to make a living. So if things get more expensive, we’ll have to negotiate with manufacturers to give us better margins and offer better discounts and incentives to customers. It might take a few months to settle down that’s all.”
The best advice, however, comes from market watch expert Sumita Gupta. “This is the time to negotiate hard. Even post-July 1, there’ll be a lot of offers from retail stores who have already shown their pre-GST goods as sold, simply to avoid carrying forward stock, which will then attract, post GST payments as well.” Sumita suggests bargaining hard for electronics even if they’re already discounted.
The most important thing to remember is that goods (excepting fuel and alcohol) will now cost the same, no matter where you buy them. She adds, “Also, don’t let anyone fool you into paying more than the MRP, by saying any item is from pre-GST stocks or post. MRP is just that – Maximum Retail Price – that is the most you pay for that item, anywhere in India.”