Mumbaikars accorded a guarded welcome to the Goods and Services Tax (GST) on Saturday. As octroi faded into history, food and beverages became costly at hotels and restaurants, movie tickets became cheaper and traders complained of technical glitches and confusion over credits and set-offs, the commoners appeared to be reconciled to the impact of the new mode of taxation.
There were no mourners as five Octroi nakas at the entry points of Mumbai, which used to fetch an annual revenue of a staggering Rs7,000 crore for the Brihanmumbai Municipal Corporation (BMC) were shut down at the stroke of midnight of June 30 and nearly eight lakh traders across the metropolis prepared themselves for the new taxation regime with a lot of trepidation.
Introduced on April 1, 1964, octroi had all along been the main source of revenue for the BMC. However, in the eighties, the then Congress Government began to explore to ways to annul octroi and replace it with some other levy. However, the successive State Governments since then have tried in vain to abolish octroi in BMC.
The previous Congress-led Government, which had in 2014 replaced Octroi with local Body Tax (lBT) in all civic bodies except BMC, failed to abolish octroi in Mumbai civic body. So did the subsequent BJP-led Government which also could not find an alternate source of revenue for the BMC to facilitate the abolition of Octroi in Mumbai.
Since the Maharashtra Government has through its latest legislation — the Maharashtra Goods and Service (compensation to local bodies) Act, 2017 — assured compensation amounting to the tune of Rs7,000 crore a year to the BMC, the abolition of Octroi comes as a good riddance for the tax administrators. For, the five octroi nakas — Mumbai-Panvel Highway at Mankhurd), Eastern Express Highway at Mulund East, Western Express Highway at Dahisar, Mulund-Airoli link Road at Airoli and lalbahadur Shashtri Marg at Mulund — had become dens of corruption.
Though the authorities claimed that 90 to 95 per cent of the 8 lakh traders had registered themselves for GST before the new taxation came into effect, there were serious doubts as to the claim. While a large number of traders have not been able to register themselves because of technical glitches, thousands of others who have registered, complained that they have not received GST numbers.
“Since the Government uploaded the HSN Code list very late and it also came out with 50-odd notifications as late as Thursday night, there is confusion about the traders about the bracket of various goods and also inputs/output credits and set-offs in the next chain of trading,” Charted Accountant Hemant Mahajan said.
However, Mahajan was quick to add, “The concept of GST is very good. It is a value addition to the taxation system that prevailed earlier. After another two to three years, the people from all sections of the society will not only begin to realise that GST is in their interest but will also reap marked benefits of the new tax regime”. Being a city that never sleeps and a city where lakhs of people frequent hotels and restaurants, the move to levy 18 per cent of GST on food and non-alcoholic beverages in air-conditioned joints and 12 per cent in non-AC outlets has not gone well Mumbaikars.
Knowing full well that the higher taxation will bring down their business, the hoteliers and restaurateurs have begun to clamour for a uniform tax for AC and non-AC establishments.
“We are in favour of GST. The Government has levied 18 pc GST on AC restaurants and permit rooms, while 12 pc on Non AC restaurants. Our demand is to have an uniform rate of 12 pc for all AC, Non AC and permit rooms. We have to collect the tax and pay to the Government, but the consumer will bear the brunt of the tax. We have been requesting to have 12 pc as uniform rate for AC and Non AC joints,” President of the Indian hotel and restaurant association (AHAR) Adarsh Shetty said.
“The maximum downward impact was seen in the last week of June with almost 35 per cent drop in sale. During the implementation phase, we are expecting issues to crop up, especially in the first three months, but are not unduly worried about it as the Government is expected to help us resolve them. All the same, we are geared up the GST regime,” Hotel and Restaurant Association of Western India (HRAWI) President Dilip Datwani said.
However, what has brought cheer to the cinema goers that with the introduction of GST, watching movies at multiplexes has become cheaper. For, the prevailing entertainment duty of 40 to 45 per cent on the base price of movie has come down to 28 per cent. Following the GST roll, most of the multiplexes have slashed the ticket prices.
Similarly, ahead of every Railway budget, Mumbaikars are worried if there will be hike in the railway season tickets. Following the GST, there would not be any change in the price of second class season tickets, while the GST on first class season tickets will be five per cent instance instead of 4.5 per cent of service tax that existed earlier.
Similarly there will be a maximum rise of Rs137 per ticket and a minimum of 65 per ticket in the fare of an executive-class seat and AC Chair car in Tejas Express, respectively. likewise, there will be a marginal increase in the fares of AC superfast special between lokmanya Tilak Terminus (lTT)–lucknow, Nagpur –Amritsar, Nagpur–Pune, other special and AC special trains and also the (lTT)-Karmali Double Decker.
Meanwhile, the real estate sector is looking for some reliefs from the Government. “The introduction of GST is a major step towards encouraging ease of doing business for all the segments of the industries as it unifies different taxes into a single tax structure. While for all other sectors, it also comprises of their total indirect tax liability, the same doesn’t hold true for real-estate. Developers will still have to bear other expenses like stamp duty which ranges from 5-8% of the value of the immovable property. An additional imposition of GST of 12% on land values is another drawback which will affect the growth of the industry, especially in cases where land value is relatively high,” Jaxay Shah, President of CREDAI, the apex body of private real rstate developers associations, said.
Shah said that for a sustainable growth of the industry which is the second largest contributor to the GDP, the GST Council would have to consider accommodating the abatement of land value in the new regime to ensure that prices did not rise.
Sunil Mishra, Chief Strategy Officer, PropTiger.com, Housing.com and Makaan.com, said: “GST is the third tool unleashed by the government after Demonetisation and RERA to clean up and simplify buying of Real Estate in India. Although this Trishul of D-R-G has affected the real estate sales for 1 -2 months, we are confident that each initiative will have the final impact of drawing out the sector out of the current troubles. Although GST will bring the required transparency in the sector, the change will emerge only after the first few months. After the successful implementation, we foresee the investors re-entering the sector”.
Surendra Hiranandani, Chairman & MD, House of Hiranandani, said there is no doubt that it will be a game-changer for Indian industry, bringing in a more comprehensive and uniform tax structure that will ensure greater transparency in the economy. “However, there are certain areas in which we would like the government to intervene at the earliest and provide clarity on the same,” he said.