Taxing day for retailers as India's GST takes effect

A pre-GST clearance sale at a showroom in Bhopal last Friday. Dealers all over India offered huge discounts before the Goods and Services Tax (GST) was implemented. The unified tax is expected to boost manufacturing, facilitate the movement of goods
A pre-GST clearance sale at a showroom in Bhopal last Friday. Dealers all over India offered huge discounts before the Goods and Services Tax (GST) was implemented. The unified tax is expected to boost manufacturing, facilitate the movement of goods across state borders, improve tax collection, reduce the scope for corruption and increase revenues.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Smaller shops struggle with different tax rates, but traders will likely get used to regime soon

Confusion plagued the first day of the Goods and Services Tax (GST) roll-out in India even as Prime Minister Narendra Modi assured the nation that the biggest tax reform in decades would boost economic growth.

Major shops and restaurants migrated immediately to the new system, while smaller shops and traders struggled, particularly with the different tax rates for different items and services.

Many traders, who do not have computers, were writing out invoices trying to figure out the taxes.

"I am just listening to my accountant for now. My accountant has given me a list. So I am using that," said Mr Ashok of Ashok Stores, a convenience store in Delhi.

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The confusion was expected to last a week or two.

"There are many traders who have multiple commodities attracting multiple taxes. Wherever there is confusion, they are asking fellow traders or consultants in a bid to understand the rates," said Mr Praveen Khandelwal, national secretary-general of the Confederation of All India Traders.

"I think in a week or 10 days, when traders are accustomed, this confusion will not be there," he said, adding the real challenge was ahead, with traders filing monthly and annual returns and claiming credits on the cost of inputs.

A STEP FORWARD

I request those who have fears to dismiss them... The country is moving a step forward towards a modern taxation system. This is a system that is simpler, more transparent. It will help us curb black money and corruption and reward honesty.

PRIME MINISTER NARENDRA MODI,, appealing to citizens for understanding amid confusion on the first day of the GST.

India's GST, unlike Singapore's, has four bands set at 5 per cent, 12 per cent, 18 per cent and 28 per cent, depending on the item or service. Some everyday items such as soap, cheese and packaged tea will now be cheaper; others like chewing gum, chocolate and shampoo will become pricier.

Electrical goods, including television sets and washing machines will also become more expensive, along with beauty parlour services and gold purchases.

Overall, the GST scheme aims to simplify India's labyrinth of nearly a dozen state and federal taxes that often led to long queues at state borders for truck drivers who had to pay different taxes for the goods they were shipping. The GST is expected to end these delays.

Some retailers took advantage of the GST regime, offering discounts.

Big Bazaar, a chain of department stores, celebrated the GST's launch with a midnight sale offering savings of up to 22 per cent.

Mr Kishore Biyani, CEO of Future Group, which runs Big Bazaar, tweeted the store's first sale receipt of 1,055 rupees (S$22.50) under the GST regime and said that the sale was to celebrate the implementation of the GST.

The unified tax is expected to boost manufacturing, facilitate the movement of goods across state borders, improve tax collection, reduce the scope for corruption and increase revenues.

The GST, which had been in the works for over a decade, was launched at the stroke of midnight from Parliament by Mr Modi and Indian President Pranab Mukherjee.

"I request those who have fears to dismiss them," said Mr Modi.

"The country is moving a step forward towards a modern taxation system. This is a system that is simpler, more transparent. It will help us curb black money and corruption and reward honesty," he said.

The opposition Congress boycotted the ceremony, saying it did not support the current version even as President Mukherjee, a former Congress finance minister, called the GST a much needed "disruptive change" but acknowledged there would be "teething troubles and difficulties in the initial stages".

Amid the confusion, consumers were happy that the sales, which started a month ago, were still continuing.

"The sales were really fantastic. The prices were down on electronics. But it is also scary, maybe the prices are going to hike up eventually," said Ms Ritu Sharma, a travel consultant, who picked up a television set at a 40 per cent discount.

A version of this article appeared in the print edition of The Sunday Times on July 02, 2017, with the headline 'Taxing day for retailers as India's GST takes effect'. Print Edition | Subscribe