The National Anthem in Parliament at midnight;One Nation one Tax..history being made.All of India abuzz people on edge because it boiled down to whether things would get cheaper or more expensive.
Fast Moving Consumer Goods (FMCG) sales are on the rise, truck queues at state borders for octroi have been drastically lowered but eating out has become an uncomfortably expensive affair: One month after the historic midnight hour launch of the GST regime in India, people are yet to make up their minds on whether they think it is a good thing or not.
Among those who believe in the GST regime is Ganesh Jayadevan, VicePresident, Products, and Innovation, at ANSR Consulting, a firm that helps Fortune 500s set up a global presence in India.
“GST is a good thing, it is a perfect law. It is just widely misunderstood and that comes because people don’t understand the complications that existed in the previous system with central taxes, state levies, octrois, intra-state taxation, inter state taxation and the like. People can, and indeed had made an entire career of understanding the taxation mire,” he added.
“GST helps businesses. If a truck took 11 days from Kashmir to Kanya Kumari earlier, stopping at every state border, now it takes only five days. The ease of doing business will be much higher. More importantly, transparency will be higher as will compliance for taxes. Buyers will insist on billing so that they can claim the credit for GST,” said Jayadevan.
He agrees that there is a downside as with all things. “Smaller businesses have slabs for exemption but intermediate and larger firms who deal with them won’t be able to claim the GST credit so there is bound to be some impact there. It will be a problem and will constrict the market place.” Another problem, he contends is that there is no law preventing states from levying any further taxes. Maharashtra and Tamil Nadu have already imposed their own taxes, over GST. “If every state starts doing this, you’re back to square one,” said Jayadevan.
On a more grassroots level, Export house manager, Alokeshwari Ranaut is among those who benefitted after the GST regime began. She travels to Karnal from her Noida residence twice a week. “Those ugly Octroi queues on the run-up to every border checkpoint have all but disappeared. There are trucks and it isn’t as though truck drivers have suddenly acquired road manners and the highway is heaven but things are so much better.”
“GST is a great step towards transparency... How many consumers knew before GST what all taxes they paid? How much of the price of each item was VAT, or excise, or multi-tax? GST has subsumed 72 taxes and 17 taxes. Additionally, there is no state entry tax or octroi on GST paid goods,” Information and Broadcasting Minister, Smriti Irani, pointed out in her usual articulate manner.
Prafulla Kumar, an economic researcher tends to agree. “It is a fact. Consumers earlier had no idea what taxes and cesses were really being added on. As long as there was a printed bill (and who knows how many establishments had dual bill Books people would accept whatever bill they were given. Now, at least one is sure that what we’re being charged in the name of taxation is in fact, reaching the government’s coffers. Or at least most of it.”
Kumar asserts, “traditionally, the middle-class has always believed and resented that traders and the business class get away without paying taxes. And so, there is malice, glee and righteousness – all mixed up in how people view GST. People do feel happy that the business community is having to shell out because there is always a feeling (rightly or wrongly) that traders don’t pass on the benefits to consumers.”
Eating out is one area where this antitrader sentiment runs high. It has become more expensive. In roadside tea-stalls, the price of tea has doubled one Rupee to two or three. Upmarket restaurants have hiked their prices by as much as 20 to 30 per cent, citing GST of 18 per cent on airconditioning as the excuse.
“The rational side of my brain tells me that the dust will settle down in a few months and prices will start to make sense. But last week, when I took out a visiting cousin and his wife to dinner, I was horrified that the bill was much higher than what we usually pay there,” said Bhupesh Chauhan, an IT professional
“Usually for four people to have a nonvegetarian meal (and no alcohol), our bill would be around Rs 2,000. This time it was Rs 3,000. We ordered the same meal we always do and though I’ve been hearing in the news that eating out would be marginally more expensive, the bill was very high and we will have to reduce dining out,” he added. Most restaurants in Delhi, Bangalore, and Mumbai have already increased cover prices. “GST has gone up on air-conditioning to 18 per cent,” explained the manager at a popular eatery in Delhi’s Khan Market. But pushed to explain, how exactly this worked to merit a steep increase in menu prices, all that the man could say was “Ma’am, I’m only an employee. This is the owner’s order. And prices were due for a hike anyway because everything has become more expensive.” Employees at several eateries in Mumbai and Chandigarh confirmed similar price hikes were on the cards if they had already not been implemented.
Meanwhile, organisations like the Institute of Cost Accountants of India have set up online help-desks for people to get answers to GST related queries. “There are at least 50-60 queries that are coming up regularly, and we have over 50 experts across India who are helping provide answers online,” said an institute official.
The larger impact of the GST regime is yet to be determined. The Kolkata Metro Rail Corporation, for instance, has estimated that costs of construction will go up but has not arrived at a concrete figure yet. Most people, however, agree with Central Board of Excise and Customs Vanaja Sarma, who said at an FICCI meeting in mid-July that different things would keep coming up as the situation evolves. “When you roll out something this mammoth, various nuances and issues will keep emerging for at least six months or a year,” she said.