Gst does not call for distress sales

Gst does not call for distress sales

Afire sale ahead of the roll out of the goods and services tax is undoubtedly beneficial for consumers, but disruptive for industry and the overall economy. Retailers have been forced to sell all kinds of products at heavily discounted prices to clear stocks. Nor do they intend to replenish stocks till GST has rolled out. That, in turn, forces a production slowdown as well, to make faltering industrial production even weaker. This kind of disruption arises from misconceptions, lack of clarity on the tax department’s part and poor communication of whatever clarity it has. This must change.
Dealers worry that the transition rules will not allow them to claim over 40-60% tax credit on the excise duty paid by the manufacturer on goods in their showrooms after June 30. The tax department is to blame for this fear.
The sale invoice that stockists and distributors have from manufacturers will obviously not mention how much excise the manufacturer has paid. But since the manufacturer has sold these goods with an invoice, there is every reason to assume that the excise duty payable on them has been paid in full, and the stockist/distributor must get full credit for it, and not just 60% of the due.
Some banks are reported to be adding to the confusion, advising clients to buy now as GST could push prices up. Other vested interests are also in the fray, to create confusion and mobilise sections of the population against the new tax. Tobacco traders are reportedly instigating farmers claiming that the 5% reverse tax farmers will collect from tobacco buyers will constitute an equivalent reduction in the net price they receive. This, of course, is nonsense, as the buyer can take credit for this 5% tax paid when they pay GST on subsequent value addition to produce tobacco products, all of which now come under the tax net. The government must take a tough stand against those seeking to create confusion over GST.
The first step is for the government’s own policies to be logical and clear, giving full credit for the excise paid on stocks. That would put paid to distress sales over GST.