GST Hike Will Add Burden On Common Public: Sandip Chhettri, TradeIndia

The GST Council has recently decided to place a 5 per cent goods and services tax (GST) on pre-packed and labelled items like meat (except frozen), fish, curd, paneer, honey and dried leguminous vegetables, dried makhana, wheat and other cereals. 

Similarly, an 18 per cent GST will be levied on fees charged by banks for the issue of cheques (loose or in book form). Maps and charts including atlases will attract a 12 per cent levy. Goods that are unpacked, unlabelled and unbranded will continue to remain exempt from GST.

In a conversation with BW Businessworld, Sandip Chhettri, Chief Executive Officer (CEO), TradeIndia said that India is currently witnessing a time when inflation is high. One cannot ignore that the new hike definitely impacts the finances of a middle-class man. Edited excerpts: 

Do you support the central government's move to hike the GST on several items?

The new regulation on the GST hike is surely a strategic move by the government but will add to the burden on the common man. Indian businesses contribute generously to the economic growth of the nation. 

Given the large number of firms constituting SMBs in India, the Indian government has been truly supportive of the sector and has always come up with several initiatives to empower these SMBs. 

However, the new tax reforms introduced in the form of GST have only led to small and medium-sized companies facing a fresh set of challenges, which does not adversely affect the larger companies with financial leverage. 

We are currently witnessing a time when inflation is high. One cannot ignore that the new hike definitely impacts the finances of a middle-class man. No wonder the common populace of the country often views such measures in a negative light, as public perception and reaction rest on narratives. 

How will the move impact the common public amid the high inflation?

The hike in the rate of commodities from edible oils, milk products, and tetra packs to kitchen utensils will be more burdensome for the lower-middle-income class, as most of these items from a significant part of a consumer’s consumption basket. This hike will surely impact the kitchen and family budget for many households.

With GST, do you think the taxation system of our country has become simpler?

Yes, GST has propelled growth in the country's taxation system. Despite some teething troubles, the GST regime has eased the way business is done in India and it is easier for enterprises to flourish in a shorter time frame. It is a boon to MSMEs as they are less dependent on tax experts due to a simplified return filing system in place. 

Previously, each state charged a different rate of tax, which led to great inefficiencies and a high cost of compliance. The GST has replaced the complex indirect tax structure with a simple, transparent, and technology-driven tax regime and has thus integrated India into a single common market. 

Under GST, companies can look at national operations and expansion as it is now a simplified process and the documentation has been reduced. Earlier, a company looking to do business in every state had to make multiple different submissions to various government authorities. Under the GST, that number has been reduced to just a dozen. 

What are the ways by which India can minimise the negative effect on businesses?

Indian businesses have a great role in reviving the economy. It has the potential, capacity, and ability to bounce back the economic growth of the nation. Given the large number of firms constituting SMBs in India, the Indian government has been truly supportive of the sector and has always come up with several initiatives to empower these SMBs. 

However, the new tax reforms introduced in the form of GST have only led to small and medium-sized companies facing a fresh set of challenges, which does not adversely affect the larger companies with financial leverage. 

The major reason behind GST implementation was to eliminate issues arising from cascading taxation, with the government undertaking several measures to simplify and streamline the procedure. However, many manufacturers and suppliers are still finding it difficult to cope with the new regime. 

For the growth of businesses and increasing the scope of employment generation in the process, these challenges that have been created by the new tax regime need to be addressed. 

We understand the government needs to tighten the rope to catch hold of suppliers or manufacturers trying to escape registration and claim exemption from GST by keeping unlabeled goods. However, the daily essential items are not just bought by one class. It remains common among people from all strata of society.

There are concerns that the move will affect other sectors. Do you agree with that?

The government of India wanted to rectify the tax anomaly in the country via the hike in the GST regulation, but one cannot ignore its impact on the various sectors. For instance, the 5 per cent GST without an input tax credit on hospital rooms with rent exceeding Rs 5,000 would definitely have an adverse impact on the general public. 

The new regulations would make healthcare expensive for patients, and certain people might face difficulty while trying to avail quality services. 

To make healthcare accessible and inexpensive for citizens of all economic groups, it should receive the most subsidies and GST exemptions. Additionally, the apparel, textiles, and footwear sectors believe that the new regulations would lead to a significant hike in their cost of production. 

Personally, I think the government’s decision appears to be a mixed bag for the manufacturers. The pandemic had adversely impacted the MSME sector, and this decision would also affect their working capital.

Additionally, the uniform pricing will be an additional burden on the MSME units that manufacture low-cost clothing, and these units may suffer from a decline in demand. In the long term, many unorganized sector companies may move out of the GST regime. 

The recent decision to impose GST on pre-packaged food items of up to 25kg like atta, paneer, and curd could add some pressure on volumes in the short term and also make items costlier for consumers, but the FMCG sector might witness a revival during the festive season, which is right around the corner.