The first day of the GST regime in the country witnessed predictable confusion as shops, business establishments, hotels and restaurants struggled to come to terms with the new tax structure whereas consumers tried to gauge its impact on their daily bills. At the same time, automakers and some retailers announced price cuts to lure customers, but people had to pay more for high-range readymade garments and selected white goods such as TVs and ACs.
Top automaker Maruti Suzuki India (MSI) slashed prices of its models by up to 3 per cent with immediate effect in order to pass on GST benefits to its customers. In a statement on Saturday, the company said it has transmitted the entire benefit of the GST rates on vehicles to its buyers. The company, however, hiked prices of diesel variants of Ciaz and Ertiga models with smart hybrid technology by over Rs1 lakh because of withdrawal of tax concessions on mild hybrid vehicles under the GST framework.
Similarly, Tata Motors’ Jaguar land Rover (JlR) has reduced prices for all cars manufactured in India by up to 7 per cent.
Mobile phone makers Apple reduced the retail prices of iPhones, iPads, Macs and Apple Watch models for its consumers in India. The Rs60,000 Apple iPhone 7 (32GB variant) can now be purchased at Rs56,200. The Rs70,000 iPhone 7 (128GB) is now available for Rs65,200 and the Rs80,000 256GB variant at Rs74,400. The base model (32GB) of Apple iPhone 7 Plus is now available at Rs67,300 as opposed to Rs72,000 previously.
On the retail front, Big Bazaar, owned by Future Retail ltd, announced discounts of 2 per cent to 22 per cent on groceries and household supplies across its stores in 26 States. Online Fashion portal Myntra too announced GST discounts.
In the national Capital, apparel stores continue with attractive schemes, but buyers much to their dismay found out that most brands have got costlier on account of the GST as offers are not inclusive of taxes in many cases. According to officials at different stores of levi’s, Arrow, United Colours of Benetton, and US Polo, while discount offers such as “buy two, get two” remain the same, the total outgo from consumers has increased as they have to pay extra taxes. “The buy 2, get 2 offer last week cost me Rs5,100, but today they charged me more on the same offer,” said a customer of an apparel brand here, adding that GST has made clothes costlier.
The discount on old stocks is still there, but now that the systems have been updated, the tax rate is different and not inclusive of the discounted price, said a store manager of levi’s. At the entrance of the store, a hoarding with “Flat 50 per cent off and taxes extra” greets customers.
Similarly, an executive at an Arrow outlet said, “Our computers have been updated and we are now charging as per the new tax rate which is more than the old tax rate.”
Meanwhile, people planning to purchase white goods will have to shell out more money as most appliances and durable makers have increased their prices in the new tax regime. Durable makers would also go for another hike before the festive seasons as the industry is considering a price revision based on input credit, when their existing stock of raw materials and components would replenish.
“For our sector, the net tax would go up. The current tax rate is around 25-27 per cent and would go to 28 per cent. Therefore, immediately the consumer price, which is market operating price, would go up if brand and dealers want to retain the same margin,” said Godrej Appliances business head and executive vice-president Kamal Nandi.
Although trade partners and dealers have exhausted their stocks by showering discounts up to 50 per cent, makers still have finished and raw materials lying at warehouses and would take two-three months to avail the tax credit and bring it at pre-GST level.
“Once we start getting input credit from the freshly purchased raw material, which would happen down the line in two months, then we would have price at the same level as pre-GST days,” Singh said.
An executive in multi-brand consumer durable retailer Croma told PTI that its system has been updated and a tax of 28 per cent is being levied separately on ACs and refrigerators. He, however, said getting new stock is still an issue.
Under the indirect tax regime, man-made apparel up to Rs1,000 will attract a 5 per cent tax, lower than the existing 7 per cent. However, those that cost above Rs1,000 will attract 12 per cent. Another customer said there is hardly any branded garment below Rs1,000 on which the tax has been reduced. Most of them are over Rs1,000 and the tax on them has gone up.
Meanwhile, trades continued with their protest in different parts of the country against the GST. A majority of cloth shops in Gujarat remained shut while those who kept it open said they did not carry out any business transaction. Various cloth merchant associations in the State as well as in some other States had earlier called for a three-day protest across the country from June 27 to 29.
“There is no bandh call made by any association, but most shops remained shut on their own in protest. There is no business as no merchant has acquired the GST number yet, and the situation is likely to continue until a solution is arrived at by Government,” said Gaurang Bhagat, president of Maskati Kapad Mahajan, an association of cloth merchants in Ahmedabad.
There are around 2.5-3 lakh cloth merchants in the State who will suffer losses due to the ongoing protest, Bhagat said.
Cloth merchants are demanding a complete withdrawal of the 5 per cent GST on clothes, and have said merchants were not given much time for GST compliance. They said cloth merchants were never brought under any tax system, so they should be exempt from the GST as well.
Ahmedabad’s kite manufacturers too protested against the GST by taking out a rally. They said kite manufacturing being a cottage industry, GST on them will adversely affect small seasonal earnings made by local manufacturers.
Wholesale markets across Madhya Pradesh saw a thin footfalls following confusion over the duty structure under the GST regime. “The wholesales traders and customers in Madhya Pradesh are confused over GST as they don’t have any knowledge on GST levies on different goods,” Ahilya Chamber of Commerce and Industry president Ramesh Khandelwal told PTI.