India’s nationwide Goods and Services Tax (GST) was meant to unify the $2 trillion economy and make it easier for companies to transact across state borders. Nearly a month on, many are finding that doing business is more complicated than ever.<\/p>\n
Ambiguous rules under the new, multi-rate sales tax that went into effect on July 1 have left firms confused on how to price their products. The tax’s complex structure – four main rates ranging from 5 to 28 percent – has hurt sales and risks denting economic growth and government revenues in the months ahead.<\/p>\n
Airlines, for example, are uncertain whether to tax premium economy seats as economy or business class – at rates of 5 percent or 12 percent, respectively. Auto repair shops face a similar quandary as GST rates vary for different jobs.<\/p>\n
“People are either overcharging or undercharging for their work,” said Surinder Paul, who runs one workshop in South Delhi.<\/p>\n
People are either overcharging or undercharging for their work,” said Surinder Paul, who runs one workshop in South Delhi.<\/p>\n
Even computer maker HP Inc , which is marketing a laptop product to help small businesses comply with the new tax, is seeking clarity.<\/p>\n
Under the GST, desktops and laptops are taxed at 18 percent, while multi-function printers and monitors attract a 28 percent charge.<\/p>\n
“Monitors, CPUs and other parts of a computer are imported as a single unit,” said Poonam Madan, a tax official at HP. “What rate do we charge – 18 or 28 percent?”<\/p>\n
Billed as India’s biggest tax reform since independence in 1947, the GST replaced more than a dozen federal and state levies and was meant to unify the country into a single market.<\/p>\n
While teething troubles were expected, the ensuing chaos has some officials worrying about the repercussions for Asia’s third-largest economy. Annual growth slowed in the January-March quarter to 6.1 percent, its weakest pace in more than two years.<\/p>\n
If growth slows further, federal finances would face pressure. A big test will come in September, when a grace period on filing complete monthly GST returns ends.<\/p>\n
A survey by tax software provider Tally Solutions found that more than 40 percent of small businesses were still not up to speed on how the GST works and two-thirds hadn’t yet installed compliance software.<\/p>\n
TAX CRASH COURSE<\/strong><\/p>\n New Delhi has launched an active outreach programme to educate companies and explain different provisions of the new tax. The exercise has also become a crash course for tax officials in the anomalies of the new tax structure.<\/p>\n Officials have discovered that holiday tour operators are charging the new tax not only for services provided in India but also for those offered abroad.<\/p>\n While vegetable seeds remain tax exempt, paddy, cereal and corn seeds now attract 5 percent tax. This has hit sales at companies such as Monsanto , whose local seed merchants have no experience of paying tax.<\/p>\n “Our sales are getting hammered at a time when they would normally be booming,” Arindam Lahiri, Monsanto’s taxation lead in Asia & Africa, told Reuters. “This anomaly needs to be fixed urgently.”<\/p>\n Revenue Secretary Hasmukh Adhia, overseeing the GST rollout, tweeted this week that nearly 8 million businesses were enrolled to pay the tax and the transition “is going on smoothly”. He did not respond to a request for comment.<\/p>\n But for some companies it has been anything but smooth.<\/p>\n Tobacco firms such as ITC Ltd were blindsided by further rule changes after the GST went into effect. These firms lost more than $7 billion in stock market value last week after the government suddenly hiked cigarette taxes.<\/p>\n New Delhi’s rationale for the increase was that the GST had unintentionally handed tobacco companies a windfall profit.<\/p>\n Adding to the pain, a couple of Indian states raised local taxes or imposed new levies in a challenge to Prime Minister Narendra Modi’s ‘one nation, one tax’ mantra.<\/p>\n The GST was originally expected to boost India’s economic growth by as much as 2 percentage points. But a convoluted structure has made many economists mark down their expectations.<\/p>\n If anything, growth dividends are expected to accrue only over time, and not even the government’s chief economic adviser, Arvind Subramanian, is daring to estimate its near-term impact.<\/p>\n “GST in its current form fails to harmonise tax rates across products or enhance ease of doing business significantly,” analysts at Jefferies said in a note.<\/p>\n India’s nationwide Goods and Services Tax (GST) was meant to unify the $2 trillion economy [\u2026]<\/span><\/p>\n","protected":false},"author":1,"featured_media":1826,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9273],"tags":[],"yst_prominent_words":[],"_links":{"self":[{"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/posts\/1823"}],"collection":[{"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/comments?post=1823"}],"version-history":[{"count":1,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/posts\/1823\/revisions"}],"predecessor-version":[{"id":7975,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/posts\/1823\/revisions\/7975"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/media\/1826"}],"wp:attachment":[{"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/media?parent=1823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/categories?post=1823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/tags?post=1823"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.hostbooks.com\/in\/hb\/wp-json\/wp\/v2\/yst_prominent_words?post=1823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}