New Delhi, May 23 (IANS) The Finance Ministry has ruled out GST waiver or deference to businesses as part of the economic relief package to help them cope with the situation arising in the wake of Covid-19 pandemic and the resultant nationwide lockdown.
In discussions within the ministry, it has been said that Goods and Sales Tax exemption or deferral is not required as it would not given any benefit to industry but seriously impact the revenues of both the states and the Centre.
With the Centre announcing a mega relief package of Rs 20 lakh crore as part of the Atmanirbhar Bharat Abhiyan, there have been oft-repeated demands for the GST wavier, this time for a period of six months. The argument given is that GST exemption would lead to revival of demand due to reduction in prices and hence benefit in the fight against Covid-19.
The government has provided exemption and moratorium on payment of various taxes and debt as part of the package.
Contrary to what is being suggested, government sources said on the condition of anonymity that GST exemption would seriously jeopardise the industry's interests and not result in any significant gains to consumers.
Therefore, there is no point to exempt businesses from this tax that would lead to blocked input tax credit (ITC), resulting in increase in manufacturing cost and a higher price for consumers.
"Hopefully, the Centre is not considering the demand. Exemption of GST on the final product is never a good idea. It distorts the value chain. It does not necessary lead to reduction in prices. In fact, it adversely impacts domestic industry," Najib Shah, former chairman, Central Board of Indirect Taxes and Customs (CBIC), told IANS.
The issue for GST exemption has surfaced particularly with respect to items needed in the fight against the pandemic: Ventilators, personal protection equipment (PPE), Covid-19 test kits, sanitisers, etc.
At present, the liability of the inputs "be it 5% or 12% or 18%" is more than offset when discharging the 5% or 12% GST liability on PPE or ventilator, the entire liability being 'paid' by the credit of taxes accumulated at the earlier stages of manufacture.
If GST is exempted, this credit facility will be unavailable, leading to higher final price of the equipment.
In the past also, when the GST exemption on sanitary napkin was allowed, it led to similar hardship for domestic manufacturers of sanitary napkins. Later, domestic industry complained of adversity.
It is also equally important to keep in mind that GST waiver provides much larger incentive for imports because imports do not come with any baggage of input side taxes compared with the domestic supply.
GST provides a level playing field to domestic industry vis-a-vis the imports.
Illustratively, waiver of tax on a mobile would mean that domestically produced mobile phone has suffered the taxes on its inputs, while the imported mobile phone does not. Hence, imported mobile would be cheaper, making the domestic one non-competitive.
"Any decision to review the GST rates cannot be taken unilaterally by the central government. It is the recommendation of the GST Council that prevails in respect of GST rates. With the situation of dire economic crises and states requiring resources more than ever to deal with the post Covid-19 pandemic situation, the Council may not have comfort of this option. It is an option that causes hardship to the businesses and the state finances, while providing virtually no relief to customer in the first place."
States GST revenue may see steep fall of 80-90 per cent in April, the first full month of lockdown that saw business and economic activity coming to a standstill.
By Sanjeev Sharma
New Delhi, May 29 (IANS) Brands and retailers have asked the malls to close the commercial agreements with reduced rents linked to the trading density of the malls.
A formula has been proposed in order to simplify the process and speed up the discussions, called as the Red-Orange-Green approach that will distribute the burden.
Red is the lockdown period in which the proposal is a complete waiver of rent and CAM (common area maintenance) charges and cancellation of invoices that have been raised.
Orange is the period post-lockdown when business is below normal. A variable model wherein the rent plus CAMs is based on the trading density of the mall, so if the entire mall is trading at 70 per cent of LY levels then rent plus CAM for all tenants signatory to this letter, becomes 70 per cent of LY levels.
Green is the period when business gets back to normal. As soon as the trading density of the entire mall sustainably touches 100 per cent of LY levels, rent plus CAM terms will switch back to pre-Covid terms.
When contacted, the Retailers Association of India (RAI) said the retailers are having a direct dialogue with malls on the issue.
Queries sent to Aditya Birla Fashion and Retail and Arvind Lifestyle remained unanswered at the time of publication.
Retailers and malls are currently engaged on this issue and a mutually acceptable arrangement is yet to be reached. The brands seem to be petitioning the malls in their individual capacity but raising common issues on the applicable rent.
Retailers had written to the malls in the second week of April 2020 wherein relevant signatories of the said communication had appealed to for a complete waiver of rent and CAM for the period of Covid-19 led lockdown and for a reduced rent for a period of 9 months post the opening of the lockdown.
"All signatories have also independently and directly communicated the same appeal to you and explained the compelling circumstances and context related to the same," as per the letter sent by the retailers.
"We regret to note however that we have still not been able to arrive at a mutually acceptable arrangement on the above. This despite the fact that retailers and their association have gone out of their way towards advocacy with govt agencies for a support package for malls. As a result of these efforts, we understand that you have received a
moratorium of minimum 6 months on LRDs and also malls are expected to be allowed to open soon. We will continue to make these efforts with a win-win mindset," the retailers added.
Retailers have pointed out that they will soon be confronted with the humongous tasks of re-opening malls and stores, bringing customers back and ensuring the safety of all involved during day-to-day operations.
Retailers and brands have to additionally deal with massive accumulation of inventories, unprecedented disruption in manufacturing and supply chain, and the huge shift of customers to e-commerce, amongst other things.
"We urge you once again to precipitate closure of commercial arrangements with the signatories of this letter so that we can have a timely and smooth opening of our operations in your mall," they added.
"The Government of India, the Supreme Court and various authorities across the world have acknowledged that the Pandemic is a difficult time for all businesses and individuals. Governments have taken significant steps to provide relief to ensure viability of livelihood. We appeal to your sensibility to provide support to retailers and brands to overcome to impact of the pandemic and make retail trade viable for the future," it said.
(Sanjeev Sharma can be contacted at email@example.com)