Mumbai: indian sellers collectiveAn umbrella body of industry associations and sellers across the country urged finance minister and consumption tax The Council rejected the GoM (Group of Ministers) recommendations on: Rationalization of goods and services tax rates. Sell-side agencies believe that the new fifth 35% GST and pricing-based rate structure will fundamentally change the country’s GST framework with devastating consequences.
These suggestions go against the letter and spirit of Prime Minister Narendra Modi’s promise to Indian citizens that GST would be a “good and simple tax”. The proposed, essentially different, GST framework is neither good nor simple. Instead, it hurts retailers’ profit margins, causes compliance nightmares, and drives parallel economies. The move will mainly benefit Chinese producers, who dominate the market for cheap products at the expense of Indian producers.
Abhay Raj Mishra, member and national coordinator of the Indian Sellers Collective, said: “If the government’s recommendations are adopted, all the benefits of the GST regime will be wiped out and cause permanent damage to India’s vast network of long-established retailers. .
He further explained, “Implementing a 35% tax on undesirable goods such as tobacco and aerated drinks will exponentially increase their illegal markets and a large number of sellers will exit the formal economy. Pricing-based rate structures will trigger manipulation or redesign of business model to beat the system, this would mean a compliance nightmare and extremely high risk of litigation.
India’s traditional retail industry has been eroded by e-commerce and fast commerce, and such a large-scale shift in GST will sound its final death knell.
Indian sellers collectively identified 5 direct consequences that harm the business environment:
1. Graded GST will make goods with incremental features more expensive, thereby depriving middle-income people of the opportunity to purchase these products as it will be beyond their ability to pay. This is a regression that will lead to poor people continuing to live like poor people.
2. A 35% tax on undesirable goods such as tobacco and aerated drinks will make these products unaffordable to ordinary people, forcing them to choose illegal, inferior and unsafe options such as smuggled and counterfeit bottled drinks and similar brand cigarettes, It’s cheap for consumers, but can have the most serious health effects on those who don’t have the money to pay for the disease. Furthermore, the market for defective goods will be dominated by illegal and smuggling syndicates, to whom small retailers will succumb in order to survive.
3. Too many slabs and rate-based sub-slabs will make compliance a nightmare for small and medium-sized business owners, who may prefer to return to a cash economy. This will also lead to manipulation and under-invoicing, with dire litigation consequences.
4. Tax authorities that only focus on revenue generation and ignore social impacts may try to classify more goods into higher tax categories, which will require reclassification and inventory readjustment, forcing frequent changes in business models, triggering a series of lawsuits. This will also breed corruption in the tax administration system.
5. An overly complex tax system, rising costs of quality goods, business models that require frequent changes, rising corruption and a booming black and cash economy will stifle small and medium-sized retail businesses and ultimately hurt investor sentiment.
AICPDF (All India Federation of Consumer Goods Distributors) National President Dhairyashil Patil said, “The Indian retail community heartily appeals to the honorable Prime Minister, Finance Minister and the GST Council not to accept rationalizations and simplifications as proposed which are against the principles. If this move is implemented , will exacerbate the difficulties of the already troubled retail sector.
“If small retailers, which are the backbone of the retail economy and an important part of people’s livelihood, are forced to close down, the overall goal of reducing the cost of goods for people will be completely defeated. The increase in compliance costs under the complex GST system will erode its already established Thin profit margins make operating costs unsustainable for micro and ultra-small retailers, which will inevitably lead to their exit from the market, further putting pressure on the retail ecosystem.
