As India gets ready to ring in the unified GST, people in tiny islands of Andaman and Nicobar and Lakshadweep may perhaps be the sole exception who stand to lose out once the tax structure is implemented.
The islands do not impose any sales tax or VAT to make up for the additional cost required for transporting goods.
But with the launch of the goods and services tax (GST) from July 1, all goods and services consumed in the islands –like elsewhere in the country — will be levied a tax of 5, 12, 18 or 28 per cent.
In other words, this would make the goods pricey.
Prof Jagdish Mukhi, Lt Governor of Andaman & Nicobar Islands, at the meeting of the GST Council earlier this month flagged this peculiar problem.
According to the minutes of the meeting, he stated that Andaman and Nicobar Islands are situated about 1,250 km into the sea and as a result, cost of goods supplied to these increases between 5 per cent and 25 per cent.
In order to allow the local residents access goods at a reasonable price, no VAT is levied in the Union Territory (UT).
He stated that with the introduction of GST in the UT of Andaman and Nicobar, the goods would turn dearer.
Farooq Khan, Administrator, Lakshadweep also stated that they had no octroi, and introduction of GST would lead to increase in prices.
Mukhi suggested that a mechanism should be devised to provide compensation to the Andaman and Nicobar UT.
The Centre assured to look into the problems separately.
Another issue facing the island is absence of any bureaucracy dealing with the tax matter. That explains the administration is training staff on possible tax implications.