The Retailers urge GST Council. Indian Sellers Collective, a national umbrella organization of sellers and trade associations, has urged the Finance Minister and the GST Council to reject some of the proposals for rationalizing the GST rate, such as the inclusion of a special rate of 35% on certain products.
The sellers’ group believes that a pricing-based rate structure and a fifth GST slab of 35% on demerit items including cigarettes, tobacco, and aerated beverages will significantly and substantially alter the nation’s GST system.
The Indian Sellers Collective said in a statement Thursday, before of the 55th GST Council meeting scheduled for December 21, 2024, in Jaisalmer, Rajasthan, that these recommendations go against the letter and the spirit of the proposal that it will be a “good and simple tax.”
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Conversely, it will negatively impact retailers’ profit margins, cause compliance issues, and encourage a black market. It stated that Chinese manufacturers, who dominate the market for low-cost goods, will gain the most from this action at the expense of Indian manufacturers.
According to Member and National Coordinator, Indian Sellers Collective, if the GoM’s suggestions are accepted at the next GST Council meeting, all the benefits of the GST system would be lost, and the country’s extensive and long-standing retailing network will suffer irreversible harm.
Their illegal market can grow rapidly if demerit items like tobacco and aerated beverages are subject to a 35% tax, and many vendors will leave the regular sector. In order to circumvent the system, a pricing-based rate structure will lead to either business model re-engineering or manipulation. This will result in compliance headaches and a significant danger of litigation for small and mid-tier merchants.
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“E-commerce and quick-commerce are already undermining traditional Indian retail, and this significant change in GST would be the final straw for it. Vested interests who wish to weaken and subject Indian shops and intermediaries to their agenda have misled the GoM, he continued.
A 35 per cent tax on demerit goods like tobacco and aerated drinks will put these products out of reach for the common man, forcing them to choose illicit, inferior, and unsafe options like smuggled and fake bottled beverages and cigarettes
Additionally, it stated that illegal and smuggling syndicates will control the market for inferior items, with small shopkeepers acting as their subordinates in order to survive.
In addition to making compliance a nightmare for small and medium-sized business owners who might want to go back to the cash economy, it stated that an excessive number of slabs and rate-based sub-slabs will also result in under-invoicing and manipulation, which might have disastrous legal repercussions.
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