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Tuesday, 11 July 2017

Here is how traders are avoiding tax post GST in India

Businesses are already coming up with innovative ways to ensure that their products remain exempt or at lower rates under the goods and services tax (GST). How are they making it possible? Here's a look:

At the midnight of June 30, GST was rolled out in India at a grand event in the historic Central Hall of the Parliament. At the event, Prime Minister Narendra Modi had said that only will GST help us create One Nation, One Tax but will also help in bringing more transparency and end corruption. A week into the implementation of the Goods and Services Tax, traders in India have already found a way to avoid tax and save money. According to a report by ET, businesses are already coming up with innovative ways to ensure that their products remain exempt or at lower rates under the goods and services tax (GST). How are they making it possible? Here’s a look:


Under the GST regime, footwear below the price of Rs 500 are being taxed at 5% while above that at 18%. So to save the tax, shopkeepers have started to make a separate bill for each shoe of the pair, as per the report. Similarly, in clothing, apparel under the price of Rs 1000 is taxed at 5% while above it will be charged at 12%. So, the sellers have decided to sell different parts of a garment on different bills. So, if a shopkeeper gives you separate bills for your kurta and pyjama, don’t be surprised.

Another loophole is that branded rice is taxed at 5% while unbranded rice is exempted from it. India Gate, which is the largest selling rice brand in the country is already trying its best to exempt from paying goods and services tax (GST) as it didn’t get its brand name registered under the Trade Marks Act 1999. “This is to further clarify, declare and certify that ‘India Gate, Indian Farm, Lotus and Unity’ brands are owned by KRBL Ltd but since they are not registered in Class 30 under ‘Trade Marks Act, 1999’ hence ‘NIL’ GST rate is applicable on it,” KRBL Ltd, which sells India Gate packaged rice, said in an internal communication dated 3 July, as per a report by Livemint.

This scope of avoiding tax or paying fewer rates became possible because the government decided multiple rates under GST. While few products are exempt from tax, others are charged at 5%, 12%, 18%, 28% and 28% plus cess. Also, the tax will be divided between the state and the Central governments.

(Source: Financial Express)

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