Shopkeepers are taking undue advantage of the GST Council’s attempts to protect consumers, especially the aam aadmi. As most of the businessmen are trying innovative ways in order to ensure that their products remain at lower costs due to the implementation of new tax reform, GST.
One of Chennai’s shopkeeper has started selling the pair of shoes separately while a garment dealer is selling salwar and dupatta separately, in order to ensure that their items come under the lower tax regime. While a leading basmati company, which established its brand with extensive print and electronic advertising for years, is seeking to withdraw its trademark registration. The company has informed the trade about other brands not being trademarked to claim tax exempt status.
Under the new tax regime, footwear of price less than ₹500 faces GST of 5% while that above will be charged at 18%. Apparels with price below ₹1,000 attracts tax rate of 5% while above with 12% GST rate. Besides for some food items GST is zero. This includes cottage cheese or paneer, natural honey, wheat, rice and other cereals, pulses, flour of cereals and pulses but the one in containers and bearing a registered brand are taxed at 5% GST regime.
Bipin Sapra, partner, tax and regulatory services, indirect tax said, “Structurally, having different tax rates for differently priced goods creates classification disputes and litigation since there is an inclination on part of the taxpayer to find ways of charging a lower rate”. He added “If GST rate is to be determined on the basis of registered brand name, there may be products not registered but equally popular. Basis of rate determination should be more objective and non-discriminatory”.
The government is not amused by what businesses are doing. It is one thing to modify goods to avail lower rates and not to misuse the provision. According to one of the government official who knows the matter said the government doesn’t intent this with the GST implementation. However he clearly states that the GST council will revisit the framework if such type of trend increases.