Abu Dhabi, UAESunday 26 May 2019

Guarded welcome for GST in India

Hectic introduction for affected businesses but general agreement that it will be positive — eventually

India's parliament building is illuminated for a midnight session to launch the Goods and Services Tax (GST) in New Delhi, India on Friday, June 30, 2017. Manish Swarup / AP Photo
India's parliament building is illuminated for a midnight session to launch the Goods and Services Tax (GST) in New Delhi, India on Friday, June 30, 2017. Manish Swarup / AP Photo

MUMBAI // Businesses in India were yesterday getting to grips with the country's landmark new goods and services tax (GST) on the first day of it coming into effect.

The new tax, designed to replace India's labyrinth of various levies found across the country's states with a uniform system and unite India into a single market, was launched by the country's prime minister Narendra Modi in a special session of parliament in New Delhi at the stroke of midnight on Friday night. The event attracted figures from Bollywood's Amitabh Bachchan to the industrialist Ratan Tata.

In Mumbai on Saturday, however, many small businesses were in a less celebratory mood,

“I can't talk – I'm into GST,” said Afshin Kohinoor, who runs a historic Parsi restaurant in the city, called Britannia, as he sat at the counter writing out bills, while his daughter, Diana, struggled to make the entries into a computer that had been newly acquired specifically to help the restaurant comply with GST.

Meanwhile, his father Boman Kohinoor, 96 and the owner of the restaurant, stood back, observing the confusion at the cash desk, while customers happily tucked into dishes of berry pulao.

“The GST rates mean prices will be a little bit higher,” he said. “We don't mind if the public agrees to pay. It will take time for things to settle down.”

The new regime is described as the biggest tax reform to take place in India since its independence 70 years ago.

But it has met opposition from some quarters, with some trade unions on Friday conducting protests against its implementation, as they objected to some of the new rates and processes. Some opposition parties boycotted the launch event.

The introduction of the new tax comes as the UAE and other Arabian Gulf states prepare to introduce VAT for the first time in January 2018.

Under India's GST, there are four main tax slabs, ranging from 5 per cent to 28 per cent, depending on the type of product. Analysts widely expect it to help to boost the country's GDP and increase revenue collection.

Gulu Jashnani, who owns a Indian traditional clothing shop in south Mumbai called Kaysons, was also finding the new system a challenge yesterday. He explained that there were various codes that needed to be entered for the tax rates depending on the different types of fabric for saris. He was writing these down for each order, as they would be required for the monthly returns that have to be filed online for GST.

“I'm not 100 per cent computer savvy,” Mr Jashnani said. “At the moment it's very confusing. The clarity is not there yet. There's no guiding person. There's so much data, we don't know where we stand.”

He said material for saris was previously not taxed, but from now on he would have to charge customers an additional 5 per cent under GST.

“It's a good move in the long term,” Mr Jashnani added, however. “We don't know what will happen, but prices might actually come down eventually because of the cascading effect of GST.”

Dhiren Shah, who owns a pharmacy nearby, said it would take him at least a week to adjust to the new system.

“We'll have to put one more employee on for this especially, so our costs will go up,” he said. “We're not prepared. Even now we don't have a clear picture. Perhaps it's a little bit on our part and we should have been swifter in pre-planning.”

But customers at Mr Jashnani's shop did not seem to be too fazed by GST.

“I know about GST,” said a lawyer as she was being measured for a sari. "It's going to be part of life. We have to get used to it."

Updated: July 1, 2017 08:25 PM