India gets to grip with a new uniform sales tax
Businesses in India were yesterday coming to grips with the country’s new goods and services tax on its first day of implementation.
The tax, which is designed to replace India’s labyrinth of levies across the states with a uniform system and unite India into a single market, was launched by prime minister Narendra Modi in a special session of parliament at midnight on Friday.
The event attracted a range of figures including Bollywood’s Amitabh Bachchan and the industrialist Ratan Tata.
But in Mumbai yesterday, many small businesses were in a less celebratory mood.
“I can't talk – I'm into GST,” said Afshin Kohinoor, who runs a historic Parsi restaurant called Britannia, as he sat at the counter writing out bills.
His daughter, Diana, struggled to make the entries into a computer that had been newly bought to help the restaurant comply with and keep track of GST.
Meanwhile, his father Boman Kohinoor, 96, the owner of the restaurant, stood back observing the confusion at the cash desk, while customers happily tucked into dishes of berry pulao.
“The GST rates mean prices will be a little bit higher,” Mr Kohinoor said.
“We don’t mind if the public agrees to pay. It will take time for things to settle down.”
The new regime is described as the biggest tax reform in India since its independence 70 years ago.
But it has met opposition from some quarters, with some trade unions on Friday holding protests against it as they objected to some of the new rates
and processes. Some opposition parties boycotted the launch event.
The introduction comes as the UAE and other Arabian Gulf states prepare to introduce value-added tax in January next year.
Under India’s GST there are four main tax bands, ranging from 5 per cent to 28 per cent, depending on the product. Analysts expect it to help to boost the country’s gross domestic product and increase revenues.
Gulu Jashnani, who owns a traditional Indian clothing shop in south Mumbai called Kaysons, was also finding the new system a challenge yesterday.
Mr Jashani said that there were various codes that needed to be entered for the tax rates, depending on the different types of fabric for saris.
He was writing these down for each order, as they would be required for the monthly returns that have to be filed online.
“I’m not 100 per cent computer savvy,” he said. “At the moment it’s very confusing. The clarity is not there yet.
“There’s no guiding person. There’s so much data we don’t know where we stand.”
Mr Jashani said material for saris was previously not taxed, but from now on he would have to charge customers an extra 5 per cent under GST.
“It’s a good move in the long term,” he said. “We don’t know what will happen but prices might actually come down eventually because of the cascading effect of GST.”
Dhiren Shah, who owns a nearby pharmacy, said it would take him at least a week to adjust to the new system.
“We’ll have to put one more employee on for this especially, so our costs will go up,” Mr Shah said.
“We’re not prepared. Even now we don’t have a clear picture. Perhaps it’s a little bit on our part and we should have been swifter in pre-planning.”
But customers at Mr Jashani’s shop did not seem to be too fazed.
“I know about GST,” said a lawyer as she was being measured for a sari. “It’s going to be part of life. We have to get used to it.”