Tag Archives: gst news

Why is GST Anti-Middle Class but Pro-Rich, Pro-Farmer?

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When Indian Prime Minister Narendra Modi visited the White House, the pat came from the President for undertaking the daunting taks of bringing the entire 1.3 billion consumers of the country under one tax regime, making it easy for market access by sellers.

The huge transition to GST-managed tax regime may benefit those who buy white goods as discounts are visibly pushing the demand but not for the middle class, which is still reeling under demonetisation effect of last year.

Many working and salaried class families have woken up on Saturday to a high taxation as they started buying daily consumables. With one stroke, the entire unholy ‘service tax’ has gone up from 15% to 18% and immediately all banks and service providers have sent urgent SMS messages passing on the burden to consumers.

Ironic but all luxury items have seen dramatic reduction in tax structure as cars are on huge discount sale from Maruti Suzuki to Tata Motors, while mobile makers are advertising equally effective price reductions over night. Not far behind, homes will be cheaper now though an elusive dream for many.

Those in rural areas are still not affected by the GST regime. Moreover, fertilizers getting GST discount from 12% to 5%, the direct beneficiaries will feel lesser impact from the concurrent hike in prices of daily consumable items until GST spreads over the remote areas too.

But those who entered restaurants on their way to office on Saturday had to pay extra in the name of central GST tax and State GST tax. It is still not clear for them why there should be two GST taxes in the bill when the GST is being rolled out as one unified structure.

Essentially, the salaried middle class will begin to feel the impact. Since elections are far away, the government is not in a mood to revise these tax slabs on daily consumables for some time.

To offset the hike in consumable goods, commodities such as packaged cement, medicaments, smart phones, and medical devices have been showcased as products where the tax is reduced.

For instance, packaged cement worked out to more than 31% earlier but now it is 28% and if the government is expecting the builders to pass on benefits to buyers, then it’s a dream for many.

In case of medicaments, including Ayurvedic, Unani, Siddha, Homeopathic or Bio-chemic systemsalso and other medicaments in general, the rate was down from 13% to 12% now and the impact will be hardly noticeable.

Smart phones attracted a tax of 13.5% earlier and now it is 12%. Similarly, medical devices, including surgical instruments, were under 13% tax will be under 12% GST, which is not a great reduction.

Only benefit for religious-minded people is that Puja Samagri has been placed under Nil category, to woo the women who would feel the impact of GST immediately.

Otherwise, India is no longer a poor country but a rich country for the rich and for those who marvel in rich lifestyle while those who believe in Mahatma Gandhi’s simplicity would be extinct soon.

GST Roll-Out at Midnight Signifies Power Shift to Centre, Common Man at Receiving End?

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India ushered in GST amid historic midnight session of Parliament, replicating the mid-night transfer of Independence from the British Raj on August 15, 1947. However, GST inauguration speaks volumes on the tax burden than power transfer.

President Pranab Mukherjee, Prime Minister Narendra Modi, and Finance Minister Arun Jaitley addressed the gathering, before the President and the Prime Minister pressed a button to mark the launch of GST, amid allegations that it would squarely burden the common man.

Prime Minister Narendra Modi described it as “Good and Simple Tax” which would ultimately benefit the people. He even quoted a shloka from the Rig Veda to describe the spirit of common goal, common determination, leading to mutual and shared benefit for the society. He said the day marks a decisive turning point, in determining the future course of the country.

He recalled that the Central Hall had been witness to several historic occasions in the past as well, including the first session of the Constituent Assembly, India’s independence, and the adoption of the Constitution, which have set the future course of action on power shift in India. He described GST is an example of Cooperative Federalism, another power shift from the states to centre in tax revenue and share.

Recalling the famous scientist Albert Einstein who said that income tax is the most difficult thing to understand in the world, he said that GST would ensure one nation, one tax and makes it simple. He noted that it would eliminate inordinate delay in movement of goods and services across the country and makes the modern tax administration far simple and curbs corruption.

Finance Minister Arun Jaitley said, “We have made sure that small traders and businessmen are out and the compliance burden on those with annual turnover of Rs 20 to Rs 75 lakh is lower through the composition scheme,” referring to criticism that the commonman and small traders will be the worst hit under the new GST regime.

The common man faces paying higher price for every purchase he makes when he buys daily needs like jam, cornflakes and hotel food bills. He pays higher when he uses shampoo in the morning, pays higher for life insurance, mobile bills and transportation tickets of all modes. The only visible carrot in the deal is biscuits, which are not good for health as vegetable oil is mostly used in manufacturing them.

He saves if he buys annually once products like shoes, garments, hair oil, cell phones, plastic kitchenware (not steel), pressure cooker, economy class air tickets among others. Once in five-year purchase of a car may cost less now after GST but still beyond the common man’s reach.

However, the impact would be felt in a month from now, while traders will have to make adjustments meanwhile. Last year, demonetisation had affected the country and this year the GST will burden the merchant community further. But there is no choice for the middle class, which gets the impact maximum every time the government ushers in something new.