GST: Experts predict mayhem in short term

Sanjeev Sharma

Tribune News Service

New Delhi, June 27

With just three days to go for the launch of GST, experts have predicted that confusion is likely to prevail as the country is not yet ready for the GST.

While the organised sector stands to benefit from the new tax regime whereas in an economy where 90% of workers are employed informally, small businesses will face a painful period.

Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management, said there will be mayhem in the short term. “It’s clear the nation is not ready for the GST and confusion is likely to prevail. July is likely to be yet another painful month for small businesses. We think GST is likely to lead a large number of business models folding”.

He said it will lead to a dramatic shrinkage of the underground economy. In an economy where more than 90% of the workers are employed informally, GST will force companies to be enrolled in the tax system and prove they pay taxes to claim a credit against their costs. The companies will need to comply and the black economy will shrink. Many in the unorganised sector will need to transform their business models.

He said businesses based on tax avoidance models will be at significant risk of survival. Any business that is looking to stay outside the tax net will need to ensure every transaction it conducts is also with a business outside the tax net.

VK Sharma, Head — Private Client Group at HDFC Securities, said while the GST on the whole will be positive, the road to GST implementation is fraught with a lot of problems.

He said while the larger players have the means to attend to intricacies and rules of the GST, the smaller manufacturers and the trading community are the weak links in this chain. The implementation blues have been a common phenomenon the world over, so India is no exception.

He said in India the pain could be more due to the number of states as well as the tax slabs. Besides, there are infrastructure challenges as well.

With not much time left, industry is still seeking clarifications on many issues. Industry body PHD Chamber of Commerce has sought leniency in compliance regulations. Anil Khaitan, senior vice-president, PHD Chamber, said a large segment of industry, especially the SMEs, are gradually gearing up for GST and they should be given sufficient time for the nitty-gritty of GST regulations in the initial period and could be through a bit of compromise on compliance front.

Cong undecided on attending special session

The Congress is still undecided on whether to attend the special midnight session the Government has called on June 30 to roll out the uniform tax across the country. Sources said on Tuesday the party will take a stand on the issue in consultation with all other opposition parties on Wednesday. 

Coke hikes prices of aerated drinks

• Beverages major Coca-Cola India on Tuesday announced hiking prices of its aerated beverages while reducing that of packaged drinking water brand Kinley on account of upcoming GST regime
• The company said aerated beverages have been the worst hit category with the proposed tax of 40% under the GST 
• We have no choice but to minimally increase the prices even after absorbing the significant portion of the tax increase, the company said