Fake news, myths, confusion prevent steady GST roll-out

Analysts believe earlier uncertainty on the implementation date might have resulted in delay

Even till two weeks earlier, Praveen Khandelwal, secretary general of CAIT, a traders body, was trying to convince a group of business people that the goods and services tax (GST) was a reality and would be implemented from July 1.

Fuelled by a steady stream of ‘news’ on WhatsApp chat groups, the businessmen  were convinced they had more time in their hands and had not made any preparations to become compliant with the new tax regime.

Misinformation, fake news and rumours are all on the rise around implementation of GST, even as the countdown clock to the deadline ticks away. From the government not being prepared to implement to news like as many as 10,000 traders might be put behind bars as soon as the new regime is implemented are some of the rumours rife among traders.

“WhatsApp chat groups, of which many of the traders are part of, are on a daily basis getting a steady dose of fake news. A lot of incorrect news is floating around and while on our part we are trying to clear the confusion, a lot of traders are still falling prey to such information. This might cause chaos next month,” said Khandelwal. 

He says his Confederation of All India Traders (CAIT) has organised 135 conferences where they have educated at least 150,000 about GST. Even so, CAI believes this would not be enough.

According to experts, as with causing of law and order problems by using ‘fake news’ to disperse misinformation, WhatsApp chat groups are being used to stop steady implementation of the new tax regime. Various trade and industry bodies say they’re trying hard to stop this campaign.

“Yes, such news and rumours are floating around but we have made sure that every member of our association has the correct news and are asking them to educate others. Our 500,000 members have all the relevant information for a steady GST roll-out,” said Kumar Rajagopalan, chief executive, Retailers Association of India.

Analysts have in the past six months heard every sort of rumour around GST, some downright ridiculous. They believe the earlier uncertainty on an implementation date might have resulted in delay strategy at small and medium enterprises (SMEs) and the trading community. Due to piecemeal distribution and finalisation of critical pieces and states not having passed their respective SGST laws until recently, they say the results was rumours. And. indication to a major part of business that implementation would be deferred to September 2017 or beyond, causing much of the last-minute turmoil.

“There were rumours such as the government only trying to enforce preparedness by reaffirming the July 1 deadline. Another myth was with regard to a negative impact on closing stock with distributors and retailers in terms of taxes embedded, as also an increase in prices of new stocks which would be purchased under the GST regime due to a consequent increase in taxes, to be ultimately borne by such distributors and retailers and unable to be passed on to end-consumers, due to an already fixed MRP (maximum retail price),” said Krishan Arora, partner, Grant Thornton India.

He added this had created much confusion, especially in the pharmaceutical and fast moving consumer goods sectors. And, creation of unnecessary panic on lifting of new stock, as well as encashing on existing stock, with the spread of unnecessary rumour that there would be a shortage of supplies when GST would go live.

Business chambers are urging the government to intervene and educate on GST. “Misinformation is being spread via social media. The government should take necessary steps to allay concerns,” said D S Rawat, secretary-general of Assocham.

EXPERT SPEAK: Krishan Arora, partner, Grant Thornton India LLP clears some of the rumours around GST

Increased compliance burden 

This is true in the case of service providers, due to state-based registration and the monthly return filling requirement, as compared to the current half-yearly return. However, for a large section of manufacturers and traders, the burden is not as much as it seems. GSTR 1, GSTR 2 and GSTR 3 are only break-ups of a single return, with different reporting deadlines, wherein most of the information is auto-populated by the system.

Once these filings are matched, there is no further reconciliation or obligation cast upon assessees. Additionally, the assessment process under GST would also be streamlined, since the data reported is proposed to be matched/reconciled on a real-time basis.

All products and services would become more expensive

This was more to do with the trading community and consumers, which only looked at their value added tax (VAT) incidence on final supplies at 5-15 per cent. The overall effective tax rates always had an element of central excise duty of about 12.5 per cent included in the price on which VAT was levied. This does not pose a correct picture and has created a general view that GST would result in price increase and increased tax incidence. It ignores the fact that there would no cascading of taxes in GST; also, eligibility of credits across goods and services would result in a positive impact on the overall pricing of most products.