After months of discussions and deliberations, the landmark Goods and Services Tax (GST) was finally launched on July 1. But despite sporadic protests against the new tax regime in some states and among some traders, the transition from the old to the new has taken place without any major disruptions. It’s been a week since the new regime was introduced, but businesses have already started to figure out innovative ways to beat the rules and regulations to make sure their products and services remain exempt or at least be available at lower rates under the new tax regime.
It seems most businesses, if not all, are making use of the GST Council’s measures to shield consumers, the aam aadmi in particular. For instance, footwear below Rs 500 is taxed at 5 per cent, while anything over Rs 500 is taxed at 18 per cent. Apparel below Rs 1,000 is taxed at 5 per cent, while over Rs 1,000 is taxed at 12 per cent.
A tax expert with Ernst and Young told the Economic Times that ‘having different tax rates for differently priced goods creates classification disputes and litigation’. This, he said, creates an inclination on part of the taxpayer to find ways of charging a lower rate. The government, however, doesn’t seem to be amused with this trend. A government official told ET this was clearly not the intent of the tax regime, while adding that the GST Council can however revisit the framework if this trend keeps going.
Experts say businesses might be taking advantage of GST due to its multiple rates: exempt, 0%, 5%, 12%, 18%, 28% and 28% plus cess.