By ASHOK SHARMA
NEW DELHI (AP) — India’s Parliament held a special midnight session on June 30 to introduce a new single nationwide tax, replacing a complicated mix of state and federal taxes that will change the cost of nearly everything people buy.
India’s president and the prime minister pressed a button heralding the major overhaul of the taxation system — known as the the single Goods and Services Tax — from July 1.
Prime Minister Narendra Modi said a speech that the new system would eliminate 500 types of taxes in favor of one tax across the country, a catalyst that would remove trade imbalance and promote exports.
“GST is a simple, transparent system which prevents generation of black money and curbs corruption. The system gives opportunity to honesty and people who do honest business,” he said.
The main opposition Congress and some other parties boycotted the midnight ceremony, arguing that nearly 7 million traders needed more time to prepare for the new system as they would be required to file tax returns every month. The opposition, however, supported the new tax system.
India’s Chief Economic Adviser Arvind Subramanian was confident of resolving teething problems of the implementation in a month or two.
“There will be some hurdles initially. But we will be able to remove them in 1-2 months,” Subramanian told reporters.
A day earlier, at a crowded New Delhi market plastered with posters announcing massive sales, shoppers were vacuuming up household gadgets and high-end electronics in the last days before India’s new sales tax takes effect.
In the Lajpat Nagar market, Nafees Ahmad scoured the stores for a new air-conditioner and LED television set with his wife and teenage son in tow.
“Our TV is fine. We did want to buy a new one, just not this soon,” he said with a smile as he checked prices at the Electronics Paradise store.
“But when the GST is applied everything will cost more so we decided to just go ahead and buy it now,” he said, referring to the Goods and Services Tax.
He may even splurge on a new oven and a few other items if the prices were low enough, he added.
India has debated such a tax for over a decade. While economists mostly agree a single, nationwide tax will streamline business, there are concerns about how an economy as unwieldy as India’s will transition to a system that involves filing monthly tax returns online.
The government published lists last month of how almost every item, from toothbrushes to automobiles, will be taxed at rates of 5 percent, 12 percent, 18 percent or 28 percent. Businesses were ordered in January to adopt or upgrade cash registers and computers so they could comply with the changes before they took effect.
It was hard for Indian shoppers to know what the cost of almost anything will be because prices vary by brand and the current taxes varied from state to state. Refrigerators and air conditioners were among items likely to cost much more; they’ll be taxed at the top rate of 28 percent while the highest tax applied in any of India’s states now is 23 percent.
Even at large multi-brand retail stores like Electronics Paradise store managers are uncertain about how things will unfold as they transition to the completely untested system.
The massive sales preceding the deadline benefit both buyers and sellers. Shoppers get bargains, and retailers avoid incurring fresh taxes on old inventories.
“We want to clear our stocks and bring our inventories to zero so that we don’t have to pay new taxes on existing goods,” said Anuranjan Thakur, manager of the Electronics Paradise store in Lajpat Nagar.
Over the last week Thakur said that sales at his store had increased five-fold.
“From 40-50 invoices a day we are up to 250 a day. Footfalls on weekdays are like the weekend.”
The store that usually shuts at 9 p.m. has been staying open until 11 p.m. every night this week.
“This is just like Diwali sales,” he said. The Hindu festival of Diwali, dedicated to the goddess of wealth, is a weeklong shopping frenzy.
But not every shopper went home with the goodies their hearts desired.
Office worker Muzaffar Ahmed took off half a day to shop for a washing machine and refrigerator with his wife and twin toddler boys. But by late evening on June 29, he hadn’t found anything.
“Everything is sold out. We’re too late,” he said as he looked at the last few washing machines on display.