Worried over confusing rumours on GST? 7 common myths busted
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Misconceptions
The rumour mills have gone on an overdrive mode since the launch of GST. Here's clarity on 7 common misconceptions about the new tax regime:
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One nation one tax
Myth: We are in a single tax regime as GST has replaced all other taxes on all goods and services.
Reality : Though this was the original idea, petroleum products—petrol, diesel—are still outside GST’s ambit and, therefore, their tax rates vary significantly across states.
For example, petrol is still sold in Mumbai at Rs 74.30 per litre (as on 5 July) compared to Rs 63.12 in New Delhi. Similarly, some other items, such as liquor, have also been kept out of GST for now.
Reality : Though this was the original idea, petroleum products—petrol, diesel—are still outside GST’s ambit and, therefore, their tax rates vary significantly across states.
For example, petrol is still sold in Mumbai at Rs 74.30 per litre (as on 5 July) compared to Rs 63.12 in New Delhi. Similarly, some other items, such as liquor, have also been kept out of GST for now.
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Small businesses will suffer
Myth: Because of computerised billing under GST, life of small businessmen will become difficult as they will need internet connectivity.
Reality: Manual billing can be done under GST and internet connectivity will be needed only at the time of filing monthly return. This can be managed even form a cyber cafe.
Reality: Manual billing can be done under GST and internet connectivity will be needed only at the time of filing monthly return. This can be managed even form a cyber cafe.
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Prices will shoot up
Myth: Personal expenses will rise as tax rates have been fixed at higher levels—18%, 28%.
Reality: Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.—did not reflect on your bill. If one adds up all the taxes, it would have been more for most items (ie effective tax rates will be lower for most products).
Reality: Though the GST rates seem high, it is only because the entire tax is now visible to the consumer. Earlier most taxes—central and state excise, additional excise, purchase tax, etc.—did not reflect on your bill. If one adds up all the taxes, it would have been more for most items (ie effective tax rates will be lower for most products).
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Corporates may try to profiteer but govt won’t
Myth: Business will try to rob you of the GST benefits, but the government won’t make money at your expense.
Reality: Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3%.
Reality: Some state governments are also acting greedy and not passing on the GST benefits to consumers. For example, the Maharashtra government has increased the vehicle registration tax by 2% after auto firms passed on the GST benefit by cutting prices by 2-3%.
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No tax other than GST is now a reality
Myth: For every good or service that has been brought under GST, there won’t be any additional tax.
Reality: GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie tickets up to Rs 100 and 28% for tickets that cost more than Rs 100.
But because of local body levies, tax in Tamil Nadu will be 48% for tickets up to Rs 100 and 58% for tickets that cost more.
Reality: GST only subsumes central and state taxes and the levies charged by local bodies are still outside its ambit. Using this loophole, the Tamil Nadu government has allowed its local bodies to charge 30% tax on movie tickets over and above GST. GST is 18% for movie tickets up to Rs 100 and 28% for tickets that cost more than Rs 100.
But because of local body levies, tax in Tamil Nadu will be 48% for tickets up to Rs 100 and 58% for tickets that cost more.
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Economic growth will rise
Myth: GST will push up the economic growth.
Reality: Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes difficult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the organised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.
Reality: Real economic growth comes from both organised and unorganised sectors. Tax evasion becomes difficult in GST, so cost advantage of unorganised sector goes and this will result in some businesses shifting to the organised sector. So, what happens will not be an in increase in ‘real’ economic growth but an increase in ‘recorded’ economic growth. However, there will be a small uptick in ‘real’ economic growth due to the improvement in the ease of doing business.
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Pay GST twice for card payments
Myth: If you make payments via credit card, GST will be charged twice.
Reality: There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a Rs 10,000 payment and a company charges Rs 50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So the 3% increase is very small—just Rs 1.5 on Rs 50.
Reality: There is no additional GST for credit card payments and the confusion arose only because there is GST on additional fees—convenience charges—levied by companies. For example, you make a Rs 10,000 payment and a company charges Rs 50 as convenience fee for helping you make the payment via the credit card, you have to pay 18% GST on that fee too—earlier you paid a 15% tax on it. So the 3% increase is very small—just Rs 1.5 on Rs 50.