Over the last two months, the centre and over 15 states have passed laws to levy the Goods and Services Tax (GST). Under these laws, tax rates recommended by the GST Council will be notified by the government. The Council met in Srinagar last week to approve rates for various items. Following this decision, the government has indicated that it may invoke provisions under the GST laws to monitor prices of goods and services.[1] This will be done by setting up an anti-profiteering authority to ensure that reduction in tax rates under GST results in a fall in prices of goods and services. In this context, we look at the rates approved by the GST Council, and the role of the proposed authority to ensure that prices of various items do not increase under GST.
Q. What are the tax rates that have been approved by the Council?
The Council has classified various items under five different tax rates: (i) 5%, (ii) 12%, (iii) 18%, (iv) 28%, and (v) 28% with an additional GST compensation cess (see Table 1).[2],[3],[4] While tax rates for most of the goods and services have been approved by the Council, rates for some remaining items such as biscuits, textiles, footwear, and precious metals are expected to be decided in its next meeting on June 3, 2017.
Table 1: Tax rates for goods and services as approved by the GST Council
| 5% | 12% | 18% | 28% | 28% + Cess | |
|---|---|---|---|---|---|
| Goods |
|
|
|
|
|
| Services |
|
|
|
|
Source: GST Council Press Release, Central Board for Excise and Customs.
Q. Will GST apply on all goods and services?
No, certain items such as alcohol for human consumption, and petroleum products such as petrol, diesel and natural gas will be exempt under GST. In addition to these, the GST Council has also classified certain items under the 0% tax rate, implying that GST will not be levied on them. This list includes items of daily use such as wheat, rice, milk, eggs, fresh vegetables, meat and fish. Some services such as education and healthcare will also be exempt under GST.
Q. How will GST impact prices of goods and services?
GST subsumes various indirect taxes and seeks to reduce cascading of taxes (tax on tax). With greater efficiency in the supply of products, enhanced flow of tax credits, removal of border check posts, and changes in tax rates, prices of goods and services may come down.[5],[6],[7] Mr Arun Jaitley recently stated that the Council has classified several items under lower tax rates, when compared to the current system.[8]
However, since some tax rates such as VAT currently vary across states, the real impact of GST rates on prices may become clear only after its roll-out. For example, at present VAT rates on smart phones range between 5-15% across states. Under GST they will be taxed at 12%.[9] As a result while phones may become marginally cheaper in some states, their prices may go up in some others.
Q. What happens if tax rates come down but companies don’t reduce prices?
Few people such as the Union Revenue Secretary and Finance Ministers of Kerala and Jammu and Kashmir have expressed concerns that companies may not lower their prices despite a fall in tax rates, in order to increase their profits. The Revenue Secretary also stated that the government had received reports of few businesses increasing their product prices in anticipation of GST.[10]
To take care of such cases, the GST laws contain a provision which allows the centre to constitute an anti-profiteering authority. The authority will ensure that a reduction in tax rates under GST is passed on to the consumers. Specific powers and functions of the authority will be specified by the GST Council.[11],[12]
Q. Are there any existing mechanisms to regulate pricing of products?
Various laws have been enacted over the years to control the pricing of essential items, or check for unfair market practices. For example, the Essential Commodities Act, 1955 controls the price of certain necessary items such as medicines, food items and fertilisers.[13]
Parliament has also created statutory authorities like the Competition Commission of India to check against unfair trade practices such as cartelisation by businesses to inflate prices of goods. Regulators, such as the National Pharmaceutical Pricing Authority, are also responsible for regulating prices for items in their sectors.
Q. Could there be some challenges in implementing this mechanism?
To fulfil its mandate, the anti-profiteering authority could get involved in determining prices of various items. This may even require going through the balance sheets and finances of various companies. Some argue that this is against the idea of prices being determined by market forces of demand and supply.[14]
Another aspect to consider here is that the price of items is dependent on a combination of factors, in addition to applicable taxes. These include the cost of raw material, technology used by businesses, distribution channels, or competition in the market.
Imagine a case where the GST rate on a category of cars has come down from the current levels, but rising global prices of raw material such as steel have forced a manufacturer to increase prices. Given the mandate of the authority to ensure passing of lower tax rates to consumers, will it also consider the impact of rising input costs deciding the price of an item? Since factor costs keep fluctuating, in some cases the authority may find it difficult to evaluate the pricing decision of a business.
Q. Have other countries tried to introduce similar anti-profiteering frameworks?
Some countries such as Malaysia have in the past introduced laws to check if companies were making unreasonably high profits after the roll-out of GST.[15] While the law was supposed to remain in force for a limited period, the deadline has been extended a few times. In Australia, during the roll out of GST in the early 2000s, an existing authority was entrusted with the role of taking action against businesses that unreasonably increased prices.[16] The authority also put in place a strategy to raise consumer awareness about the available recourse in cases of price exploitation.
With rates for various items being approved, and the government considering a mechanism to ensure that any inflationary impact is minimised, the focus now shifts to the implementation of GST. This includes operationalisation of the GST Network, and notification of rules relating to registration under GST and payment of tax. The weeks ahead will be crucial for the authorities and various taxpayers in the country to ensure that GST is successfully rolled out from July 1, 2017.
[1] After fixing rates, GST Council to now focus on price behaviour of companies, The Hindustan Times, Ma 22, 2017, http://www.hindustantimes.com/business-news/after-fixing-rates-gst-council-to-now-focus-on-price-behaviour-of-companies/story-fRsAFsfEofPxMe2IXnXIMN.html.
[2] GST Rate Schedule for Goods, Central Board of Excise and Customs, GST Council, May 18, 2017, http://www.cbec.gov.in/resources//htdocs-cbec/gst/chapter-wise-rate-wise-gst-schedule-18.05.2017.pdf.
[3] GST Compensation Cess Rates for different supplies, GST Council, Central Board of Excise and Customs, May 18, 2017, http://www.cbec.gov.in/resources//htdocs-cbec/gst/gst-compensation-cess-rates-18.05.2017.pdf.
[4] Schedule of GST Rates for Services as approved by GST Council, GST Council, Central Board of Excise and Customs, May 19, 2017, http://www.cbec.gov.in/resources//htdocs-cbec/gst/Schedule%20of%20GST%20rates%20for%20services.pdf.
[5] GST rate impact: Here’s how the new tax can carry a greater punch, The Financial Express, May 24, 2017, http://www.financialexpress.com/economy/gst-rate-impact-heres-how-the-new-tax-can-carry-a-greater-punch/682762/.
[6] “So far, the GST Council has got it right”, The Hindu Business Line, May 22, 2017, http://www.thehindubusinessline.com/opinion/the-gst-council-has-got-it-right/article9709906.ece.
[7] “GST to cut inflation by 2%, create buoyancy in economy: Hasmukh Adhia”, The Times of India, May 21, 2017, http://timesofindia.indiatimes.com/business/india-business/gst-to-cut-inflation-by-2-create-buoyancy-in-economy-hasmukh-adhia/articleshow/58772448.cms.
[8] GST rate: New tax to reduce prices of most goods, from milk, coal to FMCG goods, The Financial Express, May 19, 2017, http://www.financialexpress.com/economy/gst-rate-new-tax-to-reduce-prices-of-most-goods-from-milk-coal-to-fmcg-goods/675722/.
[9] “Goods and Services Tax (GST) will lead to lower tax burden in several commodities including packaged cement, Medicaments, Smart phones, and medical devices, including surgical instruments”, Press Information Bureau, Ministry of Finance, May 23, 2017.
[10] “GST Townhall: Main concern is consumer education, says Adhia”, Live Mint, May 24, 2017.
[11] The Central Goods and Services Tax Act, 2017, http://www.prsindia.org/uploads/media/GST,%202017/Central%20GST%20Act,%202017.pdf.
[12] Rajasthan Goods and Services Tax Bill, 2017; Madhya Pradesh Goods and Services Tax Bill, 2017; Uttar Pradesh Goods and Services Tax Bill, 2017; Maharashtra Goods and Services Tax Bill, 2017.
[13] The Essential Commodities Act, 1955.
[14] “GST rollout: Anti-profiteering law could be the new face of tax terror”, The Financial Express, May 23, 2017, http://www.financialexpress.com/opinion/gst-rollout-anti-profiteering-law-could-be-the-new-face-of-tax-terror/680850/.
[15] Price Control Anti-Profiteering Act 2011, Malaysia.
[16] ACCC oversight of pricing responses to the introduction of the new tax system, Australia Competition and Consumer Commission, January 2003, https://www.accc.gov.au/system/files/GST%20final%20report.pdf.
On March 19, Gujarat reported its first two cases of COVID-19. Since then, the number of cases have risen steadily. As of May 2, Gujarat has 4,721 confirmed cases (second highest in the country, after Maharashtra) of COVID-19. Of this 3,750 are active cases and 236 have died. The state government has responded with various actions to contain the spread and impact of COVID-19. In this blog, we look at the key measures taken by the Gujarat Government till May 1, 2020.
Initial phase
As COVID-19 cases were rising in other parts of the country, the Gujarat government notified the Gujarat Epidemic Diseases, COVID-19 Regulations, 2020 on March 14,. These regulations detail the responsibilities of hospitals and individuals, and the powers of officials with regards to COVID-19. These include: (i) flu corners in all hospitals for screening purposes, (ii) mandatory collection of travel history of people during screenings in all hospitals, (iii) mandating people with travel history to COVID-affected countries to be isolated /quarantined based on symptoms, (iv) forced detention and isolation of suspected patients who refuse voluntary isolation, and (v) containment measures in an area once positive cases are detected. Some of the other early measures are summarised below:
Health measures
The COVID-19 regulations were immediately supplemented with the n-COVID-19 Guidelines. These guidelines cover: (i) case definitions, (ii) basic infection prevention control measures, and (iii) standard precautions to be followed during the care and treatment of suspected patients.
On March 15, the government instructed all higher education institutions and other educational institutions including schools, polytechnics, anganwadis, to shut down till March 29. However, examinations of class X, XII, and universities were permitted to continue. Further, spitting in public was made a punishable offence.
On March 19, the government ordered the closure of gyms, amusement parks, wedding halls, till March 31. Additionally, all private doctors, practising modern as well as traditional systems of medicine, were instructed to report suspect cases to the government.
A Fever Helpline 104 was launched on March 20 for reporting of suspect cases of COVID-19. Further, guidelines were also issued on the reporting of cases of Severe Acute Respiratory Illnesses (SARI) to the government. These include: (i) preparation of travel history and contact lists of reported suspect cases, (ii) nodal officer to decide on steps and treatment protocol for such cases, (iii) relevant authorities to initiate follow up and contact tracing for the patient for last 14 days, and (iv) initiating cluster management guidelines when new cases emerge.
Essential goods and services
On March 20, a committee was formed by the government for daily monitoring of the availability, supplies, and manufacturing of medicines, masks, and sanitisers. On March 21, a Khas Kharid Committee was set up to ensure procurement of necessary medicines, equipments, and human resources during emergencies, bypassing existing purchase guidelines, if necessary.
Between March 21 and March 22, the government announced a partial lockdown and released a list of essential services and businesses that were allowed to operate till March 25 in the cities of Ahmedabad, Surat, Vadodara,Rajkot, Kutch and Gandhinagar. These include: (i) government and municipal departments, (ii) shops selling essential goods, (iii) various medical facilities such as hospitals, clinics, and pharmacies, (iv) public utilities, (v) railways and transportation facilities, (vi) media, telecom, IT services, and (vii) banks and insurance firms.
The government also invited NGOs to collaborate in the fight against COVID-19, by arranging for the supply of masks, sanitisers, and infrared thermometers, and running awareness campaigns.
Administrative measures
On March 18, the government issued guidelines specifying preventive measures to be taken in all government offices and employees. Recommendations inlcude: (i) avoiding face-to-face meetings and non-essential travel, (ii) closure of gyms and yoga centres in the Secretariat, (iii) home quarantine for officials exhibiting any symptoms, and (iv) mandatory leave to be given to such persons going on quarantine.
On March 21, the government released the terms of reference of Regional Nodal Officers appointed to work towards preventing the spread of COVID-19.
On March 23, the Gujarat Legislative Assembly decided to indefinitely postpone the Rajya Sabha elections that were originally to be held on March 26.
Other measures
An advisory was issued requesting private firms to not lay off workers (even if they fall sick to COVID-19) or reduce their salaries.
During the lockdown
On March 23, the state government extended and expanded the partial lockdown announced in select cities to the entire state. The lockdown was to be in place from March 23 to March 31. In addition to the exemptions announced in the partial lockdown orders, services such as (i) cattle feeding and veterinary services, (ii) stock broking, (iii) postal and courier services, and (iv) operation of industries where workers are available on site, were permitted. The state-wide lockdown has been followed by a nation-wide lockdown since March 25 . This has been further extended until May 17. Some of the key measures undertaken during the lockdown period are:
Health measures
On March 27, all private clinics and hospitals in the state were directed to utilise the Dr. TeCHO mobile app developed by the government. The app can be used for uploading information related to: (i) sample collection and (ii) reporting and surveillance of all SARI cases. Another app was launched to keep track of home quarantined people.
On March 30, COVID-19 was included as a notified disaster under the State Disaster Response Fund (SDRF). Thus, all expenditure related to relief measures for displaced / homeless people, migrant labour or other stranded persons due to the lockdown, will be made out of the SDRF.
On March 31, the government released new guidelines for the clinical management of COVID-19. These cover: (i) triage activities, (ii) case definitions and classification, (iii) infection and prevention control measures, (iii) specimen collection and handling, (iv) management and prevention of medical complications, (v) clinical management for COVID-19, (vi) discharge policy for patients, and (vii) dead body management.
To exclusively cater to COVID-19 cases, four government hospitals and three private hospitals were declared as designated COVID-19 treatment facilities. Further, the government instructed all COVID-19 hospitals to provide treatment to the people free of cost. On May 1, 26 hospitals were additionally designated as COVID-19 facilities.
Resource Management: Between March 31 and April 7, the government initiated multiple measures to address the shortage of medical practitioners in government hospitals. These include: (i) extending tenures of retiring medical personnel, (ii) ad-hoc recruitment of teachers in medical colleges, (iii) contract-based appointments of class-1 specialist and class-2 medical officers from private sector, (iv) additional responsibilities to select class-1 doctors from the epidemiologist department, and (v) temporary shifting of Ayurvedic medical officers to various locations.
On March 28, the state released guidelines for Human Resource management (HRM) in COVID-19 facilities. These include: (i) creation of district level task forces, (ii) patient flow algorithm, (iii) deployment and rotation of HR, including residents and nursing staff, and (iv) pooling of HR from various institutes and cadres.
The state has also allowed the use of AYUSH remedies and medicines, particularly for persons quarantined through contact tracing and to frontline personnel. Teams of corona warriors have been formed to assist people with preventive care. In addition, local officials have been asked to utilise the services of important stakeholders such as teachers, priests, and others, who can influence the social behaviour of people to deal with COVID-19.
A new State Health System Resource Centre has been established as the nodal agency in the state for all COVID-19 related research. Further, a COVID-19 research activity committee has been set up to lead this endeavour.
Welfare measures
On March 25, the state government decided to provide ration to 60 lakh poor families who live on daily wages. Further, on March 28, to minimise the adverse effects of lockdown on casual labour, autorickshaw drivers, and street vendors, the government announced free wheat, rice, pulses, sugar, and iodised salt for the month of April 2020.
A Vadil Vandana scheme was launched to provide free of cost meals to the elderly and the aged living alone in various cities of the state.
The state also announced that electricity bills from March 1 to April 30, can be paid by May 15.
The government announced compensatory packages worth Rs 25 lakh for each frontline worker who may lose life on COVID-19 duty. Such workers include: (i) police personnel and (ii) other government employees under the state government, panchayats, and nagar palikas .
Other measures
Industry: Relaxations from the lockdown were announced for factories and IT/ITES firms, from April 20 onwards. For factories, the conditions specified that adult workers shall be allowed to work for not more than 12 hours per day (six hours at a time) or 72 hours per week. Female workers are not allowed to work between 7 pm and 6 am. Wages are to be proportional to the existing wage structure. IT/ITES firms are allowed operate in non-containment zones at 50% strength and social distancing norms will be required to be followed.
Administrative: On March 30, the government issued an order to continue paying full wages to all fixed-pay government employees who are on leave or working from home during the lockdown. However, the employees are required to report to work whenever required by the government during the lockdown.
On April 15, nodal officers were appointed and given additional financial powers to take control of infectious disease control hospitals.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
