Removal of Inverted Duty Structure on footwear to benefit producers, consumers in long run: Govt officials
New Goods and Services Tax (GST) regime for E-Commerce Operators (ECOs) engaged in food delivery such as Zomato and Swiggy will not have any impact on the consumers, Government officials clarified on Monday.
Food Delivery Apps
These remarks came at a time when opposition parties, mainly the Congress, have said that changes in GST from January 1 will impact consumers. The Congress has also said that deferral of IDS removal for textile sector has been done for political considerations because of upcoming Assembly elections. After decisions by GST Council, ECOs are now liable to deposit GST replacing restaurants with tax to be collected from consumers at the rate of 5 per cent.
A senior government official clarified that there is no change in the tax incidence for consumers.
“In fact, this decision will reduce the compliance burden and compliance costs of restaurants and cloud kitchens, the savings from which they could potentially pass on to consumers, thereby reducing the price they pay for food delivery orders,” he said.
Further, this change has reduced the burden on restaurants and cloud kitchens of the requirement of paying taxes and filing returns etc and will, in turn, reduce their costs.
“This is a trade facilitation measure which will make it easier for the restaurants and cloud kitchens in the MSME sector to do business,” the official explained.
Opposition parties have alleged that increase in GST rates on footwear priced at ₹1,000 per pair or less to 12 per cent from 5 per cent will adversely affect the common man. According to the official, the dual rates of 5 per cent on footwear priced below ₹1,000 and 12 per cent on footwear above ₹1,000 were creating “operational and interpretational difficulties” for the trade and industry. The lower rate of 5 per cent was resulting in inversion of duty as most of the raw materials used for manufacturing of footwear attract GST of 18 per cent
“The inversion in tax structure forced the manufacturers and suppliers to file refunds of accumulated input tax credit. This increased compliance burden and costs of businesses. The uniform 12 per cent rate of GST on all footwear shall go a long way in facilitating trade and promoting ease of doing business.,” he said.
GST Council in its emergency meeting on December 31 decided to defer removal of IDS for textile. This means there is status quo on rates as against uniform rate of 12 per cent from January 1. Opposition alleged that the increase in GST rates in the textile sector has been merely postponed by one month in view of the elections. The decision has not been withdrawn and the same will be brought back after the elections, they said.
The Council after detailed discussions on the representations received from the textile sector and the State Government of Gujarat has decided to revisit the entire issue of GST rates in the textile sector and has referred it for detailed examination to the Group of Ministers.
“To say that the Council has merely deferred implementation of the increase in GST rates by one month is factually incorrect and misleading,” the official said.