Indian Sellers Collective, an umbrella body of trade associations and sellers, on Thursday urged Finance Minister Nirmala Sitharaman and the GST Council to reject the recommendations of GoM (Group of Ministers) on GST Rate Rationalisation. Earlier this month, the GoM on Goods and Services Tax (GST) rate rationalisation proposed a 35 percent tax rate for certain goods, including tobacco, aerated drinks and other related items.
At present, most of these products are taxed at 28%.
Indian Sellers Collective said that this action will hurt the profit margins of the retailers, lead to compliance nightmares, fuel a parallel economy and benefit Chinese producers who dominate the market of cheap products.
“All the gains of the GST regime will be wiped out, with permanent damage to the vast age-old retailer network of India, if the GoM recommendations are adopted,” said Abhay Raj Mishra, Member & National Coordinator, Indian Sellers Collective.
He added, “A 35% tax on demerit goods like tobacco and aerated beverages will exponentially grow their illicit market, and a large number of sellers will move out of the formal economy. A pricing-based rate structure will trigger either manipulation or re-engineering of business models to beat the system.”
The umbrella body believes that a 35% tax on demerit goods like tobacco and aerated drinks will put these products out of reach for the common man, forcing them to choose illicit, inferior, and unsafe options.
Dhairyashil Patil, National President, AICPDF (All India Consumer Products Distributors Federation), said “This move, if implemented, would exacerbate the struggles of an already beleaguered retail community.”
“Increased compliance costs under a complex GST regime will erode their already razor-thin profit margins, making the cost of doing business unsustainable for micro and ultra-small retailers. This would inevitably lead to their exit from the market, further straining the retail ecosystem,” added Patil.