Price-Based GST Slabs To Encourage Grey Market And Misreporting
RAI also wants mobile phones to be placed at a lower slab instead of 18 per cent as they are not luxury goods.
Chennai:The price-based thresholds for fixing GST rates will create market distortions, promote grey market activity and misreporting, finds retailers’ body. The move will also discourage organised retail, wedding and winter purchases. The 18 per cent GST on commercial rentals is detrimental to retailers.
While the GST slab reduction is a step towards simpler and fairer taxation, Retailers Association of India (RAI) finds that there are structural flaws in price-based GST slabs. “We strongly recommend moving to a flat GST rate across product categories rather than relying on price-based thresholds,” it said.
Under the new rate revision, garments and footwear above Rs 2,500 are placed in the 18 per cent GST slab. Those below are brought under 5 per cent slab.
According to RAI, price-based tax slabs will create distortions in the market and promote grey market activity. Retailers can take to under-invoicing or selling goods without bills as the rate differential is high. This will lead to misreporting and compliance challenges.
The higher slab will disproportionately harm organised retail, especially for mid and premium-priced products and discourage domestic manufacturing of such products, eventually undermining Make in India.
The slabs will create artificial barriers that force consumers to downgrade their purchases instead of expanding demand. Middle class consumers who want to move up the value chain will be discouraged.
This will also affect the wedding apparel, winter wear, artisan-made products and traditional products priced above Rs 2500.
RAI also wants mobile phones to be placed at a lower slab instead of 18 per cent as they are not luxury goods.
It has also requested lowering the tax slab on rentals on commercial properties from 18 per cent. “Renting is merely the grant of the right to use immovable property, not a service or manufacturing activity. Such properties are already subject to state levies like stamp duty, registration charges, and property tax. Levying 18 per cent GST results in blocked working capital and impacts lakhs of small and medium retailers,” it said.