PORT BLAIR: business community in Andaman and Nicobar fears that the Goods and Service Tax (GST) will make the islands the most expensive place in the country, putting an extra burden of price hike on the people of the remote Union Territory. The Andaman and Nicobar Islands has never had any major service tax or value-added tax (VAT).
Local businessmen, instead of paying VAT, used to pay Central Sales Tax of 2 per cent while bringing goods to Port Blair. At the Port Blair port, there was only 6 per cent octroi and added transportation as well as heavy freight charges, which would equate the VAT tax savings and hence rates of commodities were more or less same in Andaman and Nicobar Islands as it was in the mainland.
The businessmen now fear that the GST will change the equation. While the rates of commodities at Port Blair will be the same, the people of the Islands will have to shoulder the burden of transportation and freight charges which will be around 10 to 15 per cent extra. Hence, most of the goods will be expensive than the rest of India.
Experts fear that the GST will have a different impact on goods with maximum retail price (MRP) and those without MRP. While goods without MRP will certainly be costlier than the rest of the country, cost of goods with MRP will depend on the company concerned. “While big companies will shoulder the burden of transportation of goods to Andaman, many companies will stop sending goods as they will not be able to afford the freight and transportation cost. Others may put a different MRP tag on the goods to be sent to Andaman,” said Mohd Jadwet, former president of ACCI.
Not only this, the GST will also have an adverse impact on the tourism and service industry. “On food and beverage, the hike will be from 9 per cent to 18 per cent. It’s double.
On rooms, it is up from 12 per cent to 28 per cent. This is a very big impact. As such, we are struggling for survival because of high tax.
For the extra hike, tourists will suffer, not the hotel owners or the tour operators,” said G Bhasker, president of Hotel Owners Association of A & N Islands. “This is too high for Andaman tourism. As we are competing with South East Asian countries, it may have an adverse impact on tourism,” said Ahmed Hasim Badat, a chartered accountant.
Some tourism activities such as diving and game fishing, which were not under any tax next, will also come under the GST now, making the entire tour package for Andaman much much more expensive than the rest of India and South East Asian countries.
Andaman’s business community is demanding a different GST slab for the Islands so that the added burden comes down to an affordable level. Car dealers could be worst hit after the GST comes into effect on July 1.
Local distribution network of cars can be bypassed as now anyone can bring a car from the mainland and pay the freight charge since rates of cars in Andaman and the mainland will be the same and customers will have to just pay the freight extra. “Big car dealers in the mainland may give good offers and hence there is a serious threat to local dealers,” said Sagar Khurana, a leading car dealer in Andaman. “We have given a representation to the administration and demanded special status for Andaman as far as GST is concerned. We have requested that GST on hotels be kept at 12 per cent.
In that case, hike will be from 9 per cent to 12 per cent which is not very substantial. We have also requested that being a remote area, Andaman always enjoyed a special status and was a non-VAT area and customers got the benefit of it.
We have requested the Lt. Governor to give special status to Andaman,” said Girish Arora, president of Andaman Chamber of Commerce and Industry (ACCI).