After an initial bumpy ride, the Goods and Services Tax (GST)
has just completed a year. Considering the scale of changes it has undergone, it would be too early to pass a final verdict on its success.
Consumers play a vital role in any economy. So it is important to view the effects of GST
from a common man’s standpoint whose focus is primarily on pricing of various consumer products in GST.
As we all know, the GST
rates were fixed based on the principle of ‘equivalence’, the prices of many products have either gone down or have been stable like LPG for domestic supply, soap, hair oil, milk beverages. Another factor that helped in controlling the price hike in GST was the implementation of anti-profiteering provisions which ensured passing of tax benefits to the consumers. The effect of the same could be seen when most of the consumer goods were sold at reduced prices.
As far as services are concerned, by and large there has been an increase in rate from 15 per cent to 18 per cent in most of the cases such as banking, insurance, telecommunication, internet etc with very minuscule benefits flowing to them in terms of increased credits. However, services like restaurant, canteen, etc. have been kept at 5 per cent (with input restrictions). The real estate sector also did not see any immediate relief as effective rate of tax remained high in case of under-construction projects due to unavailability of transition credits. Moreover, being kept out of the GST, this sector bears the burden of other taxes as well such as stamp duty, registration fee leading to multiple levies on this sector. Even major products like petrol and diesel have been kept out of GST resulting in high consumption cost of these products for an end consumer under GST. The real benefit can be seen only after these excluded categories are brought in within the GST.
Another aspect affecting a consumer life is the uniformity of products market. GST has been able to bring the era of ‘one nation one tax’ and uniformity of law across the country. A consumer has a better and easy accessibility to the products. Earlier, differential rates of a product across the state borders governed the consumer’s preferences of market. With GST coming, such location preferences have been reduced thereby making life of a common man easy. The uniformity of taxes and improved logistics facilities have minimised state boundaries not only for offline stores but even for online stores thereby reducing the cost of such products.
GST has also brought in transparency in terms of taxes paid by a common man on various products. We can see the quantum of taxes paid to the government which was not known earlier. The invoices in pre-GST regime carried only VAT/CST rates with a hidden component of excise duties/customs duties/entry taxes etc into it. Though on eyeball matching, the new rates would appear to be higher than the old ones, one must not forget to appreciate that GST rates are more transparent than the earlier ones.
Going forward, we expect further rationalisation of the 28 per cent rate category covering goods such as air conditioner, refrigerators, cameras, paints by bringing them under 18 per cent slab and giving us a reason of joy. Widening of tax base by bringing in the goods which are outside GST like petrol, diesel, real estate under GST will also benefit in long run. With further simplification, the new regime will bring better understanding of the law.
As we move into the second year of this radical reform, the consumers have reasons to look forward.
The author is partner and leader, indirect tax, PwC India. Geetika Shrivastava, associate director, indirect tax, PwC India, also contributed to this article.
Views are personal