NEW DELHI: Indian trade associations and retailers have raised strong concerns against the proposed 35% GST rate on select demerit goods like aerated beverages, tobacco, and cigarettes. The Indian Sellers Collective (ISC), a key body representing trade associations and small business sellers across the nation, has called on the Finance Ministry and the GST Council to reject this proposal.
The move to introduce a fifth GST slab at 35% would fundamentally disrupt India’s GST framework, leading to long-term financial setbacks for millions of retailers and the Indian economy. The ISC warns that this rate could increase compliance issues, strain small and mid-sized businesses, and exacerbate the challenges posed by informal markets.
Higher Tax Could Benefit Illicit Trade & Disadvantage Indian Retailers
Abhay Raj Mishra, National Coordinator of the ISC, highlighted that implementing such a tax would disproportionately harm traditional retailers. He stated that such a move could lead to a surge in illicit markets, with goods like smuggled cigarettes and fake beverages becoming the dominant sources for consumers.
The proposal, which will likely be discussed at the upcoming 55th GST Council meeting in Jaisalmer, has sparked fears of undermining decades of economic reforms. Retailers are already struggling with challenges posed by e-commerce disruptions and quick-commerce business models, and a 35% tax could prove fatal for many small retailers.
Moreover, the ISC criticized the idea as counterproductive, claiming it violates the fundamental principle of GST as a “simple and good tax” and risks forcing many businesses back into unregulated, cash-based economies. Compliance burdens will rise significantly, particularly for small business owners, who will have to grapple with new complexities and potential litigation risks.
The proposal could also disproportionately benefit Chinese manufacturers dominating low-cost markets, thereby sidelining Indian producers and retailers.
Small Businesses and Compliance Challenges at the Core of the Debate
The trade body pointed out that too many tax slabs and rate complexities would make compliance an arduous task, leading to under-invoicing and manipulation. The risk of legal consequences, coupled with a massive tax rate, could deter businesses from participating in the formal economy altogether.
The ISC has called upon policymakers to ensure that the decision taken at the GST Council meeting prioritizes the livelihoods of millions of Indian retailers and safeguards economic stability.
The proposed 35% tax threatens not only business but the financial fabric of millions reliant on traditional retail networks.
Source: Web Team, C6N
