GST – What is GST? And How are we going to be affected by GST?
That’s the primary question haunting every trader in the market, every industry owner and even big corporate houses. How to cope with the transitional phase in the current month of June? What to do and how to handle the old stocks?
Some of these questions though answered partially, are still creating a lot of confusion. Every day there are new announcements from the govt. and our Finance minister. But … the questions still are not fully answered.
So the first thing that comes to my mind is this that HAVE we hurried through in burdening the common man and businessman with GST. The answer is YES as it took a bunch of about 500 people from the political parties more than three years to formulate a policy. Is it okay for these people sitting in the Parliament to force it on to us, 1.4 billion people, without giving us ample time to understand it?
Don’t you think that there could be better educated people outside this small bunch of politicians who can be more professionals to have advised certain better ideas? Even a small trader who is now going to be affected could have advised better practical ways so as not to hamper his/her working.
Of all the confusions, I guess the transitional stock or the stock to be carried from past is the main issue right now.
Will the prices go up or will they remain the same for the products that will be manufactured post GST?
Or do we have to deal with a situation where we have two different prices for the same product once GST is implemented?
This is the main question I am also facing as a common man.
The pinching affect is also felt in a big way to the major players, and we are getting to see a number of PRE-GST sales happening in the market. Yesterday only I was window shopping in a local market in north Delhi and found almost every shop dealing in home appliances offering pre-GST sales.
Even according to a report in the Economic Times recently, FMCG majors like Dabur, HUL, and Wipro are offering huge discounts to retailers. The move has come to avoid a situation where they may have to deal with two different prices for the same products, as under the upcoming GST regime some of the FMCG products’ prices will come down as their tax rates have been slashed by 4 to 6 per cent. Auto companies too are offering great discounts and have announced slashing prices of its products to pass on benefits of the new tax rate under GST.
But is this only a marketing stunt?
As we find that most of other products which are going to see an upward taxation brackets under GST are also being offered with big discounts.
Is this a game just to clear their old and outdated stock?
You see though a particular product might now attract a GST of (let’s say) 18% whereas before GST it only attracted a VAT of 12.5%. This means the price will go up by about 6%.
But then why are the companies offering discounted sales?
That’s the question and the answer lies in the fact that before GST there used to be other taxes like excise, octroi etc. With GST all other taxes will be replaced by GST and this GST in turn is adjustable. This makes the input cheaper for a manufacturer and hence a lower base price for a commodity. And hence in turn the product even with a higher tax rate in GST might turn out to be cheaper.
But why bother about all these mathematical jargons, go out, chill with a cold drink and shop till the sun is shining through the ongoing Sales and discounts till 30th June.