GST–Industry must pass on lower tax burden–Economic Times–26.11.2017

The government has pulled out all stops to ensure that customers reap the full benefit of the reduced tax burden on goods and services, as a result of subsuming most indirect taxes under the goods and services tax and then rationalising the tax. It has asked consumer goods companies to carry new, additional price tags on existing stocks. This is welcome. A comparison of the old and new price tags will show if industry has passed on the eliminated tax cascade to consumers by way of lower prices. In another move, tax officers have asked restaurant chains to provide menu prices before and after the rate cuts on GST. Why just chains? All restaurants must comply with the rule, with consumer complaints acting as the trigger for intervention by tax authorities.

Restaurants had brought this on themselves, jacking up prices despite getting credit for all the taxes paid on inputs (before the GST cut). Consumers should be proactive to file actionable complaints, but that also calls for a proper institutional mechanism to address consumer grievances. A standing mechanism for people to register complaints and problems, on which the body can recommend corrective steps to the GST Council makes eminent sense. The council should also adhere to the basic principle of GST, that subsumes multiple taxes and provides manufacturers credit for all the taxes paid on inputs across the value chain. The flat 5% levy on restaurants outside five-star hotels, minus input tax credit, must be open for review.

It is surprising that the Competition Commission has not taken action, suo motu, on the collusive behaviour of trade and industry in not passing on eliminated/lowered taxes to consumers. The commission should not wait for the anti-profiterring measures to kick in.

via Industry must pass on lower tax burden

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