How GST Will Impact Cost Of Bulb Across States

The goods and services tax bill, which was discussed over 7 hours in the Rajya Sabha on Wednesday, was finally given the green signal. It was a victorious moment for a bill that had been held for over a decade. Under the good and services tax, which still needs to be passed by 15 out of 29 state assemblies to finally become a reality in India, expectations are that tax on goods and services would be in the range of 18-24 per cent.

Currently, products are sold in different states/cities at different costs.

An LED bulb manufactured by LIT Ltd has a production cost of Rs 50. With excise duty its cost is Rs 56.25 and every state where this product is sold adds its own value added tax, which varies.

So the same bulb is sold at Rs 64.40 in Uttar Pradesh, Rs 60.24 in Madhya Pradesh, Rs 65.12 in Haridwar and Rs 64.54 in Hyderabad.

If 18-24 per cent tax is applied to this bulb after GST gets implemented completely the cost would come out to be Rs 59-62 all over the country, which is a uniform cost and also turns out to be cheaper in some states.

In some states there is octroi tax which is levied on products that are sold in those states. This is a local tax which varies according to the quantity of the product being brought in. For example, 25 kilograms of a product will be taxed differently than 10 kgs of a product in Punjab which levies an octroi tax.

Vinayak Vinay, a manager from manufacturer LIT, told NDTV, "With 4 different departments which exist right now, like excise department, sales tax department, octroi, there a lot of problems... different officials check different papers and there is confusion. At check points, officials ask questions about taxes which don't come under their ambit. With GST, this harassment will be avoided."

According to transport service companies, GST will also do away with a lot of harassment the truck drivers have to face while crossing inter-state borders.

Rajan Kumar, who runs a transport company in Faridabad, said, "Every state has a different tax as of now, so every state which is crossed by the truck driver he has to show if the proper material is being carried and documents. Now sometimes drivers have to stand in line for 3 days at the check post to show documents which have been given by the manufacturers as a proof of their goods. The check posts don't have any facilities. in this case bribe culture increases, whoever gives the money will finish work faster... This also affects our time... Our time is wasted in excess..."