GST was implemented on July 1st, 2017 but the journey started a long time ago, to be precise 17 years ago when our Late Prime Minister Atal Bihari Vajpayee set up a committee in 2000 to draft the law for GST but the opposition at point Congress did not support the cause and GST was shelved.BJP government returned the same favor when Congress came to power and tried to implement GST in the country. At last GST got a green signal in 2017 why the BJP government as they had the majority in the house and literally didn’t have any opposition and the opposition didn’t matter as they didn’t have any say or power to show what they wanted.
GST was basically implemented to benefit the companies as well as the customers. As the customers were the people who were bearing the extra taxation which was levied on the intrastate transfers. There was a lot of confusion how the taxation would be done what will be the state getting out of it because of this there was a lot of inertia from the side of state governments for accepting GST as they would lose on their main source of income. At last the central government was able to convince state governments that they would not lose on their revenue. But the interesting part is that the government has not included crude oil products such as petrol or diesel etc because if they do so the price of these products will actually come down from the prices being charged to the citizens of India. The implementation of GST was not properly planned as there was huge chaos among the ground level as most of the people did not keep data in the digital format and how to go about filing GST. Proper education of the process was not provided to the parties involved to avoid confusion. The sales of the companies also took a very bad impact after the implementation of GST as some of the wholesalers and retailers were not ready to take goods.
The funniest part is that the government did not have any clue to include which good in which tax bracket. Sanitary napkins were kept under the 12% bracket and recently only they have been brought under the 0% bracket. A tax bracket of 28% is kept on motorcycles which mainly normally used by the common man of India for commutation. The 28% bracket is for luxury goods and owning a motorcycle is clearly not a luxury but the government has decided to keep a blind eye towards the dwelling of the common man. The government clearly wants to help the common man that’s why they have kept the GST rate on gold as 3%.
After the implementation of GST, it has made easy for companies to keep their warehouses in which our state they want as they interstate tax has been subdued under GST and they don’t have to pay extra tax.
Now let’s check the reality has the GST really brought down the price of the goods. When GST was implemented and when the government gave instruction to the companies to transfer the benefits earned to the customer’s companies mainly took three approaches.
1) First Approach: Companies reduced the price of their products than previous prices.
Eg: Colgate has reduced 8 to 9% of the price of their product with effect to 1 July 2017. HUL gave price reduction in multipacks (eg: Lux soaps), Rin bar of 250gm price was reduced from Rs18 to Rs15.
2) Second Approach: Increasing the grammage of the product for the same price.
Eg: Increasing the grammage of low priced goods such as sachet packs of Bru coffee, surf excel bar, clinic plus shampoo. Surf Excel bar of Rs 10 giving 95gm was increased to 105gm for the same price. An extra 33% grammage for dove soaps was also introduced.
3) Third Approach: Not giving the benefits back to the customers and keeping the same price as earlier and earning exponential profits.
Many companies have the same keeping the same price even when they could give customers the product at a much cheaper price. What the companies did was they increased the base price of the product so that even after the implementation the price of GST. For example, the price of the product was Rs 100 and the cost for manufacturing was Rs60 before GST and the tax part was RS 40, now let’s say after the implementation of GST the tax part has come down from RS 40 to Rs 20. In an ideal condition, the customer should get the product for Manufacturing cost +Tax that is 60+20=Rs 80. But what the companies have done is they have increased the base price of the product from Rs 60 to Rs 80 so again the price of the product becomes Manufacturing cost +Tax that is 20+20=Rs 100 same as earlier as that of the pre-GST regime. The sad part is that this goes unnoticed by most of the customers as they don’t bother to think more as the price of the product is remaining same so they ready to pay the same price as earlier helping the companies to make money by putting a hole in the customer’s pocket.
There is a body with great powers even up to cancel the license of the companies intervening in the profiteering activity known as National Anti Profiteering Authority.
Benefits should be passed on to the customers but the basic thing which we need at this moment is awareness of the benefits that the citizens of our country are eligible by the virtue of GST in place. It’s our duty to know about the laws and make the right of it as a responsible taxpaying citizen of India.
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