Any move by the government to increase the present minimum GST slab will deal a death blow to micro, small and medium enterprises (MSMEs) which have been battling for survival in the post-Covid phase, said Madurai-based Agrofood Chamber of Commerce and Industry.
“It is heard that Union Finance Ministry is considering an increase in GST slab rates from 5, 12, 18 and 28 per cent to 8, 18 and 28 per cent. This has come as a rude shock to the trade and industry and MSMEs,” S Rethinavelu, President of Agrofood Chamber, said in a statement.
Most essential commodities are under 5 per cent rate and goods of day-to-day importance are under 12 per cent. The proposed increase in the tax rates would push up the prices of almost all commodities when India is already facing unprecedented inflation due to the Russia-Ukraine conflict. The increase in tax rates would only encourage tax evasion. Honest traders would find it very difficult to face unhealthy competition from tax evaders and they may be forced to close their establishments, he stated.
The established and proven idea of taxation is to set tax rates well within the margin of error, so encouraging compliance and increasing tax income to the government. Furthermore, given the current inflationary trend, the government can mop up more revenue even without increasing tax rates.
The business community is requesting that the Union Finance Ministry reduce GST rates to 5, 10, and 15 percent, as well as simplify GST enforcement, which has been complicated by the issuance of hundreds of clarifications, circulars, and amendments, making the otherwise progressive taxation system difficult for not only ordinary traders, but also tax officials and consultants.
“We, the trade and industry, pray that the news of higher GST rates remains a rumour, and we implore the Union Finance Ministry not to murder the goose that lays the golden egg,” Rethinavelu added.