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Pro GST: Get Your Confusions Clear with These 7 Points

The rumour mills have gone on an overdrive mode, off the track since the launch of GST.

Here’s a reality check you need to refer to:

  • Now it’s one nation one tax

Myth: Since GST will replace all other taxes on all goods and services, we are in a single tax regime.

Reality: Though this was the original idea, petroleum products—petrol, diesel—are still outside GST’s ambit and, therefore, their tax rates vary significantly across states.

For example, petrol is still sold in Mumbai at Rs74.30 per litre (as on 5 July) compared to Rs63.12 in New Delhi. Similarly, some other items, such as liquor, have also been kept out of GST for now.

  • Small businesses will suffer

Myth: The life of small businessmen will become difficult under GST because of computerised billing, need for Internet connectivity.

Reality: Shops can do manual billing under GST and Net connectivity is needed only at the time of filing monthly return and can be managed from a cyber cafe.

  • Prices will shoot up

Myth: Personal expenses will go up on account of GST making it inflationary because tax rates have been fixed at higher levels—18%, 28%.

Reality: Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.—did not reflect on your bill. If one adds up all the taxes, it would have been more for most items.

  • Corporates may try to profiteer but govt won’t

Myth: Business will try to rob you of the GST benefits, but the government won’t make money at your expense.

Reality: Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3%.

  • No tax other than GST is now a reality

Myth: For every good or service that has been brought under GST, there won’t be any additional tax.

Reality: GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie ticket up to Rs100 and 28% for tickets that cost more than Rs100.

  • Economic growth will rise

Myth: GST will push up the economic growth.

Reality: Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes difficult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the organised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.

  • Pay GST twice for card payments

Myth: GST will be charged twice, if you make payments via credit card.

Reality: There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a Rs10,000 payment and a company charges Rs50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So, the 3% increase is very small—just Rs1.5 on Rs50.

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