Mumbaikars to feel the heat with 18% GST for non-AC dining too

Mitron, sab shanth raho. Achhe din aane waale hain…

In an economic system which encourages privatisation, liberalisation and globalisation, not even the mightiest of laws can restrict wealth getting accumulated in the hands of a very few. There will be corruption everywhere and the poor will remain poor forever.
GST will make just a few more people pay tax in the same way demonetization brought out a very few cases of black money. People will find even more crooked ways of evading tax.
On the one hand, the economic and social systems adopted by our country encourage us to accumulate wealth at all costs, whereas, on the other hand, they want these money-hoarders to share their wealth with everyone around by paying taxes. What a joke!

@raven_kira

Collecting and paying it back to the govt. is, but the money is from the consumer’s pocket not the merchant’s.

I don’t fully agree to this statement and i will try to explain this with an example. I think there are many conceptual issues in the concept of sales tax and those issues become very severe when sales tax is high. Sales tax should not be more than 7-12% on any product. A better solution will be to put higher tax on income/profit of the business or firm.

Example : GST is 28% on Air conditioners. If an Indian consumer wants to purchase a new 1.5 ton ac, then his ideal purchase price will be 40,000. Many of my friends asked me to suggest an ac around this price range. In a dynamic market, price for which a product will sell is usually pre-determined (This doesn’t apply to premium or established brands such as apple and Samsung, They can price their products at will. But this statement will apply to 95% common brands)

GST on 40,000 AC = 28% of 40,000 = 11,200 (Government wants 11,200 Rs tax on each AC and i think this tax is very high)

Suppose cost price of AC for a 3rd Grade Manufacturer = 20,000. His profit per unit sale will be 8800 Rs. This manufacturer will be able to do promotion, give proper warranty and service etc in this 8800 Rs margin.

Cost price of AC for a higher grade manufacturer might be 25,000. So their profit per unit sale will be 2800 rs only and they may have to leave the market or increase their price by a lot.

And higher tax will ensure that new firms won’t even think of entering this segment. They won’t be able to compete with low grade manufacturers.

My solution is that government should tax the profit of a firm and not final price of product. Sales tax should be as low as possible.

Can you help me understand how you arrived at 220 Rs. Cost to the merchant = 600+60. The profit he expects is 340 as he wants the Selling Price at 1000. The IGST he pays is refunded to him after he sells the product, AFAIK. Cost to consumer = 1120 ( = 120 (tax) + 340(profit) + 600(product cost) +60(import duty) )

I wrote that selling price is 1000 Rs. I meant 1000 Rs including tax. And this is a very decent real world example. You won’t be able to get product for 600 and hope to sell it at 1120 rs. If you do that, somebody else will start selling the product at lower price.

Merchants aren’t giving away their income. If taxes were all to vanish suddenly, as per your example, the product cost would be 600Rs. and because he wants to make a profit of 340 Rs. he would price it at 940 Rs. He will still earn the same….the only one to benefit is the customer.

Our Point of view are different. I have an actual experience of doing business and i know how much income or tax a business generates for the government. As i explained in the previous example, with concept of sales tax, government eats into the share of good or higher grade merchant. Income is generated by hard work of a firm, and a firm will pay 50% or 70% tax (calculated based on actual income generated) only if they are getting excellent services in return.

Custom duty differs for different products. Do you have a source for this info? Sometimes an increase in duty for a particular product is done to encourage domestic products.

Many of government decisions and rules are arbitrary. I read many times that post GST, government will increase import duty for electronics from 10% to 15%

Basic Import duty on tea in India is 100% (I can understand this. Good quality tea is available in India itself)

But do you know that Import duty on Coffee and Cocoa is 100% as well!
So anybody, who wants to drink a high quality coffee or cocoa drink should pay 100% luxury tax to government. Being born in India is mistake for this person. Government behaves like a villian from 70’s movie and they need their hafta

But as I said before, you cant expect the govt. to cut the taxes in half overnight and expect it to run the country smoothly. Such a tax reduction takes place in a phased manner over many years and decades.

Yes, But taxes shouldn’t be increased arbitrarily. Increase of service tax from 12% to 15% wasn’t a good decision. Now they are increasing it to 18%. I live in a small town and the poorest people that live in a town are daily wage labourers and maids/servants. These people will also pay this 18% tax to the government on their electricity bill, water bill, mobile/DTH recharge bills and they will pay taxes when purchasing essential goods such as biscuits, shampoo, soaps, books for thier kids. I have never seen these people get any monetary benefit from the government. The only tax benefit that these people may get is in the form of roads.

Tax are not reducing in India is a “phased manner” . They are increasing in a “phased manner” . Reservation was supposed to be 10 or 20% post independence. It was supposed to be reducing in a “phased manner” . But It is increasing in a “phased manner”

@DealSeeker

As a customer, I have the option of going with either a personal loan or a credit card loan/EMI at any point of time. The only reason I choose to go with the credit card loan/EMIs is because it doesn’t require the hassle of unnecessary paperwork

Let me give you a similar example. Lets say a banana costs 10Rs universally. I go to a supermarket, I can buy the banana for 10Rs. and eat it there. Lets say, I go to a restaurant and there’s an item in the menu-banana that costs the same 10Rs. I order it and in the final bill it says I have to pay 11.8Rs incl the GST and then I’m absolutely enraged at how the govt. doles out step-motherly treatment to bananas in restaurants. Now, I understand that there are far more people paying credit card loan EMIs than people ordering bananas in restaurants, and what Im quoting is a bizarre example, but whats important is that an alternative option exists, where I don’t have to pay a tax on my bananas. And its important for a country to have such an exemption on the option that is accessible/used by all, in this case – personal loans.

but you seem to be defending the arbitrary decisions of the service tax department for no apparent reasons

I guess our opinions differ because of the viewpoints we hold, your personal view vs my macro view. To you, you are outraged at an inconsistency that a loan serving the same purpose to you is treated differently by the govt. w.r.t to service tax. To me, I tend to look at how the entire population is affected by a govt.s move. There was a possibility that all interests on loans were made taxable, as lending activities were determined to be taxable services but in 2006, the govt decided to exempt tax on bank loans interest so as to not burden people from various sections of the society who access bank loans. Is the inconsistency arbitrary and redundant? Yeah. Is it ridiculous or the most important thing the govt should think about wrt taxes atm? No, I dont think so. There are more pressing matters, like exempting service tax on processing fee for loans. That is something worth protesting/arguing about as it affects the entire population.
http://www.thehindubusinessline.com/money-and-b...
I’d rather have the govt remove the service tax on the processing fee of bananas sold in supermarkets than try to provide a clarification on how it intends to treat bananas sold in restaurants.

as this results in the ridiculous triple taxation of the customers and residents of this country

You do realise that the words double taxation, triple taxation have negative connotations, right? They imply that a person/entity has been unfairly taxed multiple times when it should’ve occurred only once. As per your use of words, you must be appalled by the double taxation that is a part of daily life all over the world, where income earned is taxed and the products purchased with the already taxed income are taxed again (I’m not sure about the triple taxation part-taxing credit card EMI interest in other countries, as I couldn’t find a reliable source)

@micke

Sales tax should not be more than 7-12% on any product. A better solution will be to put higher tax on income/profit of the business or firm.

My solution is that government should tax the profit of a firm and not final price of product. Sales tax should be as low as possible.

Many of government decisions and rules are arbitrary. I read many times that post GST, government will increase import duty for electronics from 10% to 15%. Basic Import duty on tea in India is 100% (I can understand this. Good quality tea is available in India itself). But do you know that Import duty on Coffee and Cocoa is 100% as well!

I love how people on this thread randomly throw out numbers and solutions without any data to back it up. Reduce taxes that reduce govt revenue and then reduce spending on what? Reduce food subsidies to the extremely poor? Stop midday meals programme? Reduce spending on healthcare, defense? Eliminate subsidies on train travel?
https://www.theguardian.com/global-development/...

So, what you want is – the govt should reduce GST, reduce import duties and increase taxes on companies’ profits to compensate for that(which, no doubt, will do amazing stuff for your personal import-and-sell business). Can you not see what such moves will ultimately lead to? Companies will start moving out from India, and try setting up shop in a country that taxes less and then export stuff to India as import duties will be lesser here anyways. Unemployment will rise exponentially as companies won’t prefer/move out of India.

Suppose cost price of AC for a 3rd Grade Manufacturer = 20,000. His profit per unit sale will be 8800 Rs. This manufacturer will be able to do promotion, give proper warranty and service etc in this 8800 Rs margin.

Cost price of AC for a higher grade manufacturer might be 25,000. So their profit per unit sale will be 2800 rs only and they may have to leave the market or increase their price by a lot.

What!? So any economy is doomed to be filled with 3rd grade manufacturers only? And how do these numbers have anything to do with taxes imposed on the product. Completely unrelated.

I wrote that selling price is 1000 Rs

You calculated GST @12% to be 120Rs. Its only natural that I assume your selling price was excl taxes. As per your correction, GST @12% would be around 105 not 120. Your numbers are all messed up.

So anybody, who wants to drink a high quality coffee or cocoa drink should pay 100% luxury tax to government. Being born in India is mistake for this person. Government behaves like a villian from 70’s movie and they need their hafta

Or, you know, the government can eliminate that 100% tax altogether and become the real villain to all the domestic coffee growing families here. Anything for that guy who wanted to taste a high quality coffee drink.

The only tax benefit that these people may get is in the form of roads.

Yeah, and all these must be random words scribbled on papers
https://en.wikipedia.org/wiki/List_of_governmen...

check tapzo app for mumbai location – some restaurants who were earlier not charging any tax have started to include GST… some have increased prices on the menu… and plus delivery charges on orders below 250