The Indian Sellers Collective, an umbrella organisation representing trade associations and sellers across the country, has urged the Finance Minister and the GST Council to reject certain GST rate rationalisation proposals, including the introduction of a special 35 per cent rate on certain goods.
The sellers’ group argued that a fifth GST slab of 35 per cent for demerit goods such as aerated beverages, cigarettes, and tobacco, along with a pricing-based rate structure, would fundamentally alter the country's GST framework, leading to devastating consequences.
“These recommendations go against the promise of GST being a ‘good and simple tax’,” the Indian Sellers Collective said in a statement on Thursday, ahead of the 55th GST Council meeting scheduled for 21 December 2024 in Jaisalmer, Rajasthan.
“Instead of simplifying the system, these changes will hurt retailers’ profit margins, create compliance nightmares, and fuel a parallel economy. This move will mainly benefit Chinese producers, who dominate the market for cheap goods, at the expense of Indian producers,” the group stated.
Abhay Raj Mishra, Member and National Coordinator of the Indian Sellers Collective, warned that adopting the Group of Ministers’ (GoM) recommendations would undo the gains of the GST regime and cause permanent damage to India’s traditional retail network.
“A 35 per cent tax on demerit goods like tobacco and aerated beverages will exponentially grow the illicit market for these products, pushing sellers out of the formal economy. A pricing-based rate structure will encourage manipulation or re-engineering of business models to evade taxes. For small and mid-tier sellers, this will create compliance nightmares and heighten the risk of litigation,” Mishra explained.
“Traditional Indian retail is already under threat from e-commerce and quick-commerce. A drastic GST shift like this would sound its death knell. The GoM has been misguided by vested interests seeking to weaken Indian retailers and intermediaries for their own agendas,” he added.
The group cautioned that a 35 per cent tax on demerit goods would make these products unaffordable for the common man, driving them towards illicit and unsafe alternatives such as smuggled goods and counterfeit bottled beverages and cigarettes.
Additionally, it warned that the market for these goods would be dominated by smuggling syndicates, leaving small retailers dependent on such networks to survive.
The introduction of multiple GST slabs and pricing-based sub-slabs would overburden small and medium-sized business owners, potentially pushing them back into the cash economy. It could also lead to widespread under-invoicing and manipulation, resulting in costly and prolonged litigation, the statement said.
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