Union Finance Minister Arun Jaitley on Saturday defended the multiple rates in the Goods and Services Tax regime, hinting at a possible reduction in the number of rates in the future, even as companies across the automobile, electronics, and FMCG sectors slashed prices in accordance with the new tax rates they fall under.
Also speaking at the event organised by the Institute of Chartered Accountants of India (ICAI), Revenue Secretary Hasmukh Adhia said there were large gaps in the understanding of traders and small scale industries and what was actually written in the GST laws, highlighting several misconceptions. He appealed to the chartered accountants gathered at the event to ease this confusion.
Chidambaram’s criticism
Meanwhile, former Finance Minister P. Chidambaram launched an attack on the current implementation of GST, saying that it would impose a burden on the common man, hurt small, medium and micro businesses, while also being inflationary in nature due to the multiple rates.
“There is some criticism of GST, saying there should be single rate or dual rates,” Mr. Jaitley said at the ICAI event. “It’s not possible now. Later, we can converge some taxation rates, where 12% can meet 18%. But if we do a 15% single rate, then this will affect zero rated food items used by the poor.”
“Direct tax is progressive where the rich pay more,” Mr. Jaitley added. “But indirect tax is regressive, with my buying soap or a poor buying soap tax being the same. So goods used by the poor are not taxed high and the goods used by the rich are taxed higher, that is the indirect taxation policy. Some MPs said make it a single rate. Can a Hawaii chappal and Mercedes have the same tax rate? One is for a common man, the other is a luxury item. This is important to have equity in taxation system.”
Form confusion
“There is a lot of misconceptions on returns filing, that there are three per month,” Mr. Adhia said. “We have been saying time and again, there is only one return of which there are three parts. One part is to be filled by the trader, and two parts are computer generated for you to review. You don’t have to do anything about it.”
Mr. Adhia explained that GSTR 1 is the only form that needs to be filled in by the assessee. GSTR 2, of purchases made by the assessee, will be automatically generated and only needs to be reviewed and updated in case a purchase has been missed by the supplier.
“There will be inflation. What is the government going to do about it?” Mr. Chidambaram said.
Price changes
Electronics manufacturer Apple on Saturday reportedly lowered the retail prices of all its iPhone models by 4-7.5%, as it passed on the benefits from the GST regime to consumers.
Home-grown carmaker Maruti also sought to pass on GST benefits to consumers, lowering prices on select models by up to 3%.
Tata-owned JLR has also reportedly slashed rates for its entire fleet by up to 7%. Prior to the rollout of GST, bikemaker KTM India increased its rates by up to ₹5797, depending on the model. Nestle, said in categories where there are reductions in taxes, “appropriate price reductions” would be implemented from July onwards.
