GST Council increasing cess on cigarettes on 3rd week exposes government’s unpreparedness

Written by Meghalaya Times. Posted in Editorial

Thomas Lim
In the first 15 days of the implementation of the Goods and Services Tax (GST), Union Finance Minister Arun Jaitley noted that the 28 per cent tax rate plus compensation cess on cigarettes when translated, the impact of cascading effect had not adequately factored in, resulting in windfall gain for the cigarette companies. After the council meet, keeping in mind the reduction in tax incidence on cigarettes, the GST Council on July 17, 2017 raised the compensation cess rates on the demerit good.

According to the Council, now the tax rate on cigarette remains at 28 per cent, the ad valorem at 5 per cent with the numerical amount on each category of filtered and non-filtered cigarettes is being raised to Rs 2,076 per 1,000 units, Rs 2,747 per 1,000 and Rs 3,668 per 1,000 of different categories of cigarettes. For other cigarettes the ad valorem has been increased to 36 per cent plus Rs 4,170 per 1,000 units.
The necessity of this exercise has only exposed that the Union Government did not do the homework well resulting in such lapses. Also there were no clear directions to the state governments how to implement the new tax regime, particularly in the state of Meghalaya even on the 18th day of its implementation leaving the state government still unclear as how to execute the new tax which has in turn left many business on a standstill.
On the other side, although as many as 22 states, including Delhi, West Bengal and Maharashtra, have abolished check posts within three days of the implementation of the GST, in Meghalaya check gates are still functioning and now it seems that they will continue to function for the time being. The reason cited by the taxation Minister Zenith M Sangma is that the state is waiting for E-way Bill system which has been recommended by the GST council to National Informatics Centre Pune to formulate this as soon as possible.
Meanwhile, the consumers are the most affected because at ground zero the traders and the consumers are equally confused on how to implement the new tax. Amidst this confusion companies and suppliers and many of them have been unable to fix the new rates of their commodities. Almost all the items in the market belong to the old stocks as the producers, manufacturer have stopped the supply of all items two months before July and till date no new stocks have arrived. Hence many prefer to down their shutters, especially the establishments dealing in electronics products, while the essential commodities continue to be sold at the old rate.
Some of the traders are pushing sales at the old rate as there is no clear instruction on how to fix the rate, and the service industry too is functioning with the old rate, and some are issuing back – dated bills only to avoid the confusion. Most items are not selling, and many have to wait for a few more days, while the experts stated that it will still need another six months to streamline the new tax regime.
As we close in on the completion of three weeks of the implementation of the GST since July 1, 2017, it is time the District Administration and the Taxation Department comes to the field and checks on the Traders who are taking advantage of the unpreparedness of the government in implementing GST and are charging the consumers according to their own assessment and negotiating power to convince the consumers to shell out the amount which of course will not go to the government.
The essential commodities which are assured to become cheaper are still being sold at the old rate, the Food and Civil Supplies Inspectors should come to the rescue of the consumers as they are still continuing paying the higher rate till date.
The Modi government was criticized for what many term as the harsh action of demonetization where the common citizens have to suffer, some have lost their lives while exchanging the old notes in the bank itself. Then comes the Aadhaar card, a 12 digit unique-identity number, in which regard, Modi himself has accepted the idea of Aadhaar but had a problem with its inadequacies when in April 2014 he had dismissed the biometric ID system as a ‘political gimmick’.
This time the GST too has caused a similar dilemma, freezing trade and commerce across the nation and it is expected to continue for a few more months. Modi seems unable or unwilling to learn from the past on how to implement national policies and schemes with full preparation. This has earned him the moniker of a man in a hurry.


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