Mumbai welcomes GST with some apprehensions

Real estate, manufacturing, logistics sectors say new tax regime will bring in much-needed change; hospitality, health say benefits unclear

July 01, 2017 02:34 am | Updated 07:44 am IST

Renamed: Workers cover the signboard of the Sales Tax Bhavan in Mazgaon,which will be renamed Goods and Service Tax (GST) Bhavan on Saturday.

Renamed: Workers cover the signboard of the Sales Tax Bhavan in Mazgaon,which will be renamed Goods and Service Tax (GST) Bhavan on Saturday.

Mumbai: The State government will have more say and benefit in the new Goods and Services Tax (GST) regime, which will come into force from Saturday.

The GST is intended as a unified indirect tax across the country on products and services. In the current system, tax is levied at each stage by the Union government and the States at varying rates on the full value of the goods. Under GST, tax will be levied only on the value added at each stage. It is a single tax (collected at multiple points) with a full set-off for taxes paid earlier in the value chain. Thus, the final consumer will bear only the GST charged by the last dealer in the supply chain with set-off benefits at all the previous stages.

Midnight shopping: Buyers throng a department store a little after 12 a.m. on Saturday to get a fix on price changes due to GST. The new tax system came into force Friday midnight.

Midnight shopping: Buyers throng a department store a little after 12 a.m. on Saturday to get a fix on price changes due to GST. The new tax system came into force Friday midnight.

 

Surendra Mankoskar, Additional Commissioner, Central Excise and Service Tax, said it is wrong to assume that States would lose their financial independence and the Centre would have more say and earn more. “Actually, GST is going to be more beneficial to the States.”

While Chief Minister Devendra Fadnavis said the State will support the Centre’s move, State Finance Minister Sudhir Mungantiwar said fears that States may lose revenue were unfounded. “Maharashtra, for example, will not only be compensated for the loss of ₹92,000 crore in tax revenue, this figure will be increased by 14% every year.”

Industry welcomes GST

While welcoming GST, some industry leaders expressed concerns. “We are concerned for small and medium shopkeepers, who comprise 93% of the unorganised sector,” said Viren Shah, president, Federation of Retail Traders Welfare Association ((FRTWA). It has written to Union Finance Minister Arun Jaitley for changes including invoices being signed digitally or physically by an authorised person and making three invoice copies.

The hotel industry has demanded that different tax slabs — 18% for AC hotels and 12% for non-AC — be changed. “In Mumbai, there is hardly any difference in rates for AC and non-AC hotels. We expect a uniform 12% to be applied,” said Adharsh Shetty, president, Indian Hotel and Restaurant Association (AHAR).

 

Jewellers said the change in taxes is far lower than expected, and no new investments are being made for the tax regime change. “The difference in the prices of products from the organised and unorganised sectors will go down,” Kumar Jain, vice-president, Mumbai Jewellery Association, said.

The Association of Hospitals (AOH), an umbrella body for over 50 private hospitals in the city, has called in an expert to understand the impact. “We have organised a meeting on July 4 to understand GST better. We’re not sure of details,” Dr. P.M. Bhujang, who heads the AOH, said. A chartered accountant has also been engaged by the city branch of the Indian Medical Association (IMA), which has over 4,500 doctors as members. “There is lot of confusion, We hope to get clarity after the rollout,” Dr. Jayesh Lele, member, IMA said. He added that while hospitals have been exempted, medical implants, instruments and equipment will be taxed indirectly. “What we have realised in that the final billing to the patient is going to change.”

Real estate gives thumbs-up

Anshuman Magazine, chairman (India and South East Asia), Commercial Real Estate Services said GST will bring in a much-needed renaissance. “In construction, inputs such as cement and ceramic, tiles, building blocks and bricks, prefab structural components for buildings among others have been placed in the 28% category. Components like iron and steel are in the 18% bracket. Work contracts addressing construction intended for sale were classified as a service and placed in the 12% category.”

GST is also expected to nbenefit the manufacturing sector. Gyanendra Tripathi, tax partner, EY India said, “Manufacturers were required to obtain multiple registrations, service tax, VAT and CST. With GST providing for a single GSTIN at the State level, registration has been simplified.”

Prakash Tulsiani, executive director & COO, Allcargo Logistics Ltd., added, “GST is set to change the game of logistics in the near future. While it will lead to a natural progression of the sector towards organised players, elimination of interstate tax will bring down costs significantly. It may take three to six months to realise benefits.”

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