Retailers body urges government to reject 35% GST slab on demerit goods

Bengaluru: The Indian Sellers Collective, an umbrella body of trade associations and retailers, has urged Finance Minister Nirmala Sitharaman and the Goods and Service Tax (GST) Council to reject the recommendations of the Group of Ministers (GoM) on GST rate rationalisation. The GoM had suggested a new slab of 35 per cent for cigarettes, tobacco related products and aerated drinks last week, which are presently capped at 28 per cent.

The collective is of the opinion that a new fifth GST slab of 35 per cent on these demerit goods will be favourable for Chinese companies who already dominate the Indian market in lieu of cheaper products, hurting margins of retailers at home.

The development comes ahead of the next GST Council meeting to be held on December 21, 2024 at Jaisalmer, Rajasthan.

The body also emphasised that the proposed increased arbitrage will give more room to illicit syndicates for ruling the market and captivate small retailers who are already struggling to sustain themselves.

“This will exponentially grow their illicit market, and a large number of sellers will move out of the formal economy,” said Abhay Raj Mishra, Member & National Coordinator, Indian Sellers Collective.

The move could force buyers to choose illicit, inferior, and unsafe options like smuggled and fake bottled beverages and cigarettes, are cheaper for consumers, it said in a letter to the Finance Ministry.

“All the gains of the GST regime will be wiped out, with permanent damage to the vast age-old retailer network of India, if the GoM recommendations are adopted,” Mishra added.

The collective said that at a time when the booming e-commerce and quick commerce market has already done severe damage to traditional retail, the adoption of a higher GST slab will hit brick and mortar retailers further.

An overcomplicated tax system, rising costs of superior goods along with a thriving black and cash economy will kill small and mid-sized retail businesses and eventually hurt investor sentiment, it said.

“A fair reduction in GST rates, wherever possible, is the need of the hour. However, we urge the Government to avoid any superficial exercises where reductions in some items are offset by increases in others, which would only create confusion and instability in the marketplace,” said Dhairyashil Patil, National President, All India Consumer Products Distributors Federation.