The Centre effected Goods and Services Tax (GST) midnight of June 30, barely paying attention to the imperative of adequately priming the market and the mindsets of people first. And the result is there for all to see. A week into the implementation of GST, chaos is ruling the roost.
Although firms have time till September 30 to affix fresh stickers on products stating post-GST prices and old rates, most small business houses, kirana stores and shopkeepers are seen taking advantage of the confusion and fleecing consumers. It seems people have no escape from such sharp practice till September 30.
Drug retailers have suddenly stopped passing discounts on unsold inventory to their customers. Earlier, they passed discounts of up to 10 per cent or even more on over-the-counter sales which they have suddenly stopped, saying their margins have come under strain post GST. While the authorities shrug it off as a temporary glitch, common people are bearing with the niggling problems.
On Tuesday, revenue secretary Hasmukh Adhia and company found themselves dealing with concerns regarding unsold inventory of FMCG and consumer durables players. The government warned retailers against profiteering. A government order states that retailers have three months to clear their inventory but they must affix stickers on products stating post-GST rates along with the old rates.
After September 30, they will have to affix post-GST rates only. However, retailers are trying to exploit grey areas in the notification. They have either stopped handing out discounts, selling products at MSP, or selling products without sticking the post GST rates on them. While FMCG companies have on record said they are trying to liquidate old stocks at same MRP and incurring differential losses, retailers are reaping a windfall by selling goods at higher prices.
The benefits of decreased prices, if any, by reduction of tax after imposition of GST, are not reaching consumers. No action is being taken against shopkeepers who do not reflect the new prices. The flouters are going scot-free. As of now, there is no clarity as to what will happen to the old, unsold inventory and at what price they will be disposed of.
For any rise in prices from GST, manufacturers and retailers can sell goods manufactured before July 1 at the higher price after placing two advertisements in local newspapers about the price rise and a sticker showing the higher price on the product. The earlier price should also be visible.
The difference between the retail sale price originally printed on the package and the revised price shall not in any case be higher than the extent of increase in tax or in the case of imposition of fresh tax on account of the implementation of the GST.
The delay by the government to set up an anti-profiteering authority to curb unwarranted price rise after the new levy has helped unscrupulous sellers dupe customers. The authority is envisaged to order a reduction in prices and ask companies to return money to customers. In case a customer is not identifiable, the money will go into a customer welfare fund. The authority can also impose a penalty which could include deregistration.
As it is, the middle and upper sections of society, which consume more services, are forced to pay more on services under GST as the tax incidence on services has gone up by a few percentage points. On top of it, any raise on retail prices of goods will further enhance the burden on them.
Chances are that the large middle-class population in the country — the spearhead of the country’s economy will be forced to dial down on expenditure incurred on discretionary services such as entertainment and dining out among others.
This could have a sure impact on economy as service sector accounts for nearly 50 per cent of the country’s GDP. The government will be well advised to bring in an anti-profiteering authority without delay. This will help discourage rogue sellers who are trying to make hay when the sun shines.
