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GST may consider discounts by retailers
Jan '16
The draft Model GST Act, which is being finalized by the government, is likely to alleviate a major concern of retailers as the proposed goods and services tax (GST) will be paid on the actual supply price and will factor in discounts given to customers, according to an ET Retail report.

Under the revised version of the draft Model GST Act, it is likely that the reference to impose GST on maximum retail price (MRP) on supply to consumers, where the goods were governed by the Legal Metrology (LM) Act, will be removed. A host of packaged goods - ranging from mineral water, footwear to apparel - are covered by the LM Act.

The main challenge with the proposal to levy GST on MRP in the earlier draft of the Model GST Act was that the discounted prices during sales (which retail chains typically engage in, especially during the festive season) would not have been considered. Irrespective of the discounted price paid by the customer, the GST would have been levied on the MRP itself, resulting in a higher tax outgo. Consequently, sales would have become less attractive.

According to the report, the government is also said to be examining how to tackle an issue under the proposed GST regime where importers of finished goods could stand to gain, which may hurt domestic manufacturing.

Currently, an importer pays a basic custom duty rate of 10 per cent, a countervailing duty (CVD) of 12.5 per cent, and a special additional duty (SAD) of 4 per cent. He gets a tax credit only for the SAD.

Under the proposed GST regime, while the custom duty will remain, both CVD and SAD will be replaced by Integrated GST (IGST) for which the importer will get full credit, resulting in a lower tax outflow. Government officials say that the final draft of the model GST Act will be released this month for public comments. Stakeholders will be given time to give their feedback. (SH)

Fibre2Fashion News Desk - India

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