Govt won’t use ‘hammer’ to get firms to cut prices, busts ‘myths’ on GST

 

The government does not intend to use the “hammer” immediately to pull down prices, leaving it to market forces to guide companies to pass on the benefits of goods and services tax (GST) to consumers.

“Competition will force them to fall in line. You don’t have to use the hammer immediately,” a high-ranking officer told TOI, adding that companies and small businesses were themselves passing on the gains with consumers. Several car companies, consumer goods manufacturers and white goods and mobile players have announced price changes with many more expected to follow once they resume business and invoicing after updating their software.

The statement comes amid fears of the government resorting to the use of anti-profiteering clause against those who do not pass on the benefits to consumers or raise rates disproportionately. Finance minister Arun Jaitley had met chief executives from the consumer goods industry ahead of the GST launch who assured him that they will absorb minor increase in levies and pass on major benefits to consumers. Sources said if needed, the government will meet other industry representatives but it was hopeful of companies acting on their own.

In a series of tweets, revenue secretary Hasmukh Adhia sought to bust some of the “myths”, especially those related to compliance requirements and rumours.

The requirement to register and file electronically has raised doubts among small traders and businesses about the “complexities” of GST, and the use of social media was meant to comfort businesses.
So far, the assessment in the government is that the rollout has been fairly smooth and even small businesses were gradually adjusting to the situation. “We have got encouraging reports from roadside dhabas and big restaurants as well as from kirana shops and departmental stores that have started getting acclimatised to the new tax system,” the ministry said.

Although some five-star hotels are seen to be playing tough, an officer said they will play ball in the coming days. “These are early days, businesses will share the gains, including the benefits arising from input tax credit (on taxes paid during the entire production or services chain),” the senior officer said.

Registration too is going on smoothly. Since June 25, 2.23 lakh new businesses have filed draft applications for registration with the GST Network, the not-for-profit company providing the technology backbone, with 32,000 dealers granted fresh registration. Before the window opened for the third time, around 65 lakh or more than 81% of the 80 lakh of those registered for VAT, service tax, central excise and other levies had registered with GSTN.

Monday onwards, when offices reopen after what is being called the GST weekend, fresh registrations are expected to pick up. On Friday, GSTN had also released a spreadsheet to help businesses maintain electronic records of their transactions.

Officials said the IT system is expected to be largely glitch-free for the next few days and will be tested when uploading of invoices by sellers begins later this month. Chartered accountants and consultants, however, said the system was facing initial glitches.

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