A week after the country implemented the Goods and Service Tax (GST), replacing a number of Central and State taxes, various markets in the State find themselves almost unaffected and stable. Different industries and business sectors are busy adapting with the new tax regime. Several of the markets and industries shared joy of improved business owing to the price reduction. The markets and business sectors in which the GST has caused price rise for certain products also seemed unperturbed.
A prominent market in which the GST implementation has signaled positive is the automobile industry. It is observed that across the State, business in the automobile sector has been greatly benefited because the GST has produced considerable reduction in the prices of vehicles which has resulted in an increment in the number of enquiries at showrooms. Earlier, various taxes including VAT, sales tax, excise duty, road tax, motor vehicle tax and registration duty would contribute to the overall tax of the vehicle which would go up to 40 per cent. Now, they all have been subsumed to the GST causing a corresponding reduction in price.
“The first week after GST implementation was satisfactory. There is a fine increase in the number of enquiries when compared to those in the pre-GST period. I receive at least 4-5 enquiries a day,” says Sanju K B, a team lead at Indus Motors, Thevara. Various vehicle manufacturers including Tata have come up with new prices which are much lower than the earlier prices. Tata recently announced that it had reduced the price of the passenger vehicles up to Rs 2.17 lakh.
However, those in the readymade apparel business are slightly skeptic as the GST has caused increase in the price of readymade clothing. “Readymade clothing comes under the slab of 12 per cent tax rate. Earlier the tax for readymade garments was 6-9 percent. This included VAT and excise. There will be a corresponding increase in the price. But this has not severely caused any damage to the business so far,”said an employee of ‘Kalyan Silks’ in Thrissur.
Meanwhile gold industry in Kerala has not been much affected. Earlier, the tax levied on gold was around two per cent which has now been hiked to three per cent. This is unlikely to have a huge impact on consumers.
While the markets in the State manage to maintain stability, experts observe possibility of inflation in the long run. “Though in the initial several days things may look nice, chances of inflation in the long run cannot be warded off. Service sector in which there is nearly four per cent increase in tax may cause inflation. Besides the goods for which the GST has caused an extra 6-7 per cent tax would also trigger price rise,” observed Martin Patrick, an economist based in Kochi. The haste implementation of GST, lack of a proper GST network (GSTN) and various rates for unified tax also raise questions among the economic policy specialists.
Professionals engaged in tax-related works also expressed their concern as it would take time to get a clear picture of various GST norms and clauses. “I am still in a learning process. We cannot comment at this stage whether the GST implementation in India will succeed or fail. To unify various taxes is no doubt a great move. We may at least require 3-4 months to comment on its impact,” said a tax consultant in Kochi.