THIRUVANANTHAPURAM: Those who know something about it are confused, those who know nothing about it are worried. That is the state of mind out there in different parts of Kerala as the era of Goods and Service Tax (GST), hailed as ‘the single biggest tax reform in the history of the nation’, dawns.

The State government has welcomed GST as it is expected to result in a smart increase in the State’s tax revenue, but is worried about the possibility of it impacting certain sectors negatively in the near term. Check posts will cease to be what they were till now. Experts say that GST being a ‘destination-based’ tax, Kerala would benefit from it and that the tax system would save the people from the ‘cascading effect’ experienced under the earlier system of multiplicity taxes.

However, there are many ‘ifs and buts’ that experts would like to link to the success of the new tax regime. Says N. Ramalingam, associate professor, Gulati Institute of Finance and Taxation (GIFT), Thiruvananthapuram, “GST will become a success only if people insist on bills for all the products they purchase and those engaged in inter-State commodity transactions insists on Integrated GST bills. Traders must should make purchases only from registered dealers and public sector institutions should also be ready to come under the TDS system.” The number of registered dealers in the State should go up from the present 2.25 lakh to at least 4 lakh and there must be a campaign in the language of the commoner to remove the fears and misgivings about the new tax system, he adds.

Welcoming the roll out of GST, Babu M. Philip, executive director, JOSCO Group, one of the largest players in Kerala’s gold market, says the new regime could result in a marginal increase in the price of gold in the retail market. “GST would result in an increase of 0.85% per cent in the tax on gold,” he says. Presently gold invites a tax rate of 2.15%, including the excise duty of 1%. Under the GST regime, it will go up to 3%. However, with uniform tax rate, Kerala will be able to compete with States like Tamil Nadu which currently is in an advantageous position with a lower tax rate. The gold market which is marked by unprofessional billing practices would now come under 100 per cent billing regime, which is a welcome development, he points out.

“GST is meant to simplify the highly complicated sales tax system in India but, as things stand, it has made things more complicated for the traders and more expensive for consumers,” says C.E. Chakkunni, president of the Kozhikode-based All-Kerala Consumer Goods Distributors Association. For one, there would be more returns to file—merchants would have to file returns on the 10th, 15th and 20th of every month, instead of one, on the 20th, under VAT. There would also be more formalities and more stratified tax rates, and there would be fewer forums for addressing problems as the system is online-based. Traders would end up paying more tax. When VAT was introduced years ago, the government had claimed that it would simplify the sales tax system and reduce the traders’ tax burden. But the end result was that the tax increased in stages, from 5% to 14.5% and the system got further complicated. he says.

Mr. Chakkunni says the prices of consumer goods would rise under the GST regime, contrary to the claims by the authorities. For instance, textile price would go up. So also the price of footwear priced above Rs. 500. The two-slab tax for footwear would add to the headache of footwear merchants. The tax on petroleum, one of the most widely consumed consumer goods that impact the prices of a lot of other goods, would be 56%. He asks: “The authorities had claimed that the GST would be capped at 28%, but what about petroleum products?”

Sunil Kumar, who runs a grocery story at Pattoor in the capital, says he is completely in the dark about the new tax system. “We hope that the reform does not bring major changes in the price of commodities and lead to utter confusion. The governments must ensure that the proclaimed benefits of the move reaches the consumers and were not negated by corporate giants,” he says. The same is the response from traders in Central Travancore. “We do not know what to do from Saturday. We have not yet received any official briefing on the new tax system. The officials too seem to be confused. There were also reports of distributors planning to stop supply for the next few days and it is too early to say anything on the net outcome of the new tax regime,” says M.Salim, president of the Thiruvalla Merchants Association.

G.Sreekumar, a hardware merchant in Thiruvalla is very much positive on the new tax regime. ``Though it may create lot of confusions and public apprehensions, the GST is sure to revolutionise the tax system in India and benefit the people at large in the long run,’’ says Mr. Sreekumar. In Thrissur, several textile outlets had announced discount sale over the past week on the assumption that prices would fall. "There is confusion over post-GST pricing of goods and services. There is also no clarity on how to work out the tax. As there is no clue on how the prices will be changed, we are not able to fix rates," says Shravan Paul, an interior design contractor. According to traders selling white goods in Thrissur, many companies have stopped production of electronic equipment for the last one month due to confusion in taxing and pricing.

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With inputs from George Jacob (Kottayam), K.P.M. Basheer (Kozhikode), Radhakrishnan Kuttoor (Pathanamthitta) and Mini Muringatheri (Thrissur)