The coronavirus pandemic has drastically hit various parts of the world. Its impact has been felt in almost every domain. To stop COVID-19 from spreading, there has been a complete lockdown which has further resulted in a fall of various economic sectors.
As a result, people have been panic-buying and that has resulted in an increased demand for essential items. Let’s understand how it has particularly affected the GST and its impact on essential items during this pandemic.
What is GST?
Let us enlighten you about GST in brief. GST stands for Goods & Services Tax. As the name suggests, it is an indirect tax that is applied to goods and services. Likewise, it is considered as a replacement for numerous indirect taxes that were earlier present in India.
Hence, you can say that it is an indirect tax that is applied to almost all the products and services that India has to offer. If you are a business owner, you can do a gstin search to learn more about your GST dues.
Impact of GST on Essentials During Pandemic
Naturally, it was made known that the government’s collection of GST has had a significant decline. It has fallen well below Rs. 1 lakh crore as announced in March.
Due to this concerning situation, several states in the orange and green zone have decided to restart economic activities. This was done under the permission of the Home Ministry on the strict condition of taking precautionary measures while delivering goods.
Effect on Business Activities
The daily necessities business activities have also been affected due to the nationwide lockdown situation. GST is one of the chief sources of revenue for all the states in India.
As stated before, they are now facing some severe decline in collections, i.e. around 80-90%. However, the government eased the burden on essential commodities business for 15 days in April.
Some of the most hit states in terms of revenue are Delhi, West Bengal, Assam and Andhra Pradesh. Delhi officials claim that they have collected only INR 300 crore against INR 3000 crore to consolidate the credits for seven months while filing returns in September. But before filing a return, business owners will have to provide bills to support ITC claims.
Effect on Retail Stores
Somehow all the retail chains like Kirana stores and other shops have to manage to file for GST. This has become difficult due to the public buying bulk items in panic across India. It has become rampant as they fear that they will not get the daily necessities due to the lockdown.
Items like sanitizers, disinfectants, rice, pulses, fruits, vegetables, eggs, frozen foods, handwashes, biscuits, etc., have virtually gone off the shelves. These items are hardly available in online stores as well.
Problems Faced with Essential Items
To begin with, there is no shortage of items due to panic buying, but managing the transportation of goods has become difficult. This has happened as some of the routes are near villages, small kasbahs and other small districts. Here, the people are not allowing the trucks to pass due to the pandemic.
Supply of essential daily businesses has not been an issue. During these hard times, some retailers are illegally hoarding stock to sell them at high prices. However, these activities were recognized early, and the government took strict actions.
Overall Impact of GST in India
Closure of schools, colleges, malls, pubs, and many more have also boosted the consumption of household items. Online grocery apps like Grofers, Big Basket, etc., have witnessed ongoing demand across the cities in which the services are available. As a result, there has been a 15-20 % increase in sales.
With an increase in demand, there is a need for large production and manufacturing of products. However, workers are currently migrating toward their hometown. Hence, a shortage of labourers has arised, which comes as a hurdle in increasing sales volume up to the mark.
While managing the situation, the government has notified late fee waivers regarding the filing of GST returns.
- Businesses above five crore profit margins will get relief if they file Feb-April returns by June 24.
- INR 1.5 crore will file Feb-March returns by June 29-30.
If the situation in India stabilizes, then there will be a manageable economic impact, and India’s GDP rate will grow from 4 to 4.5%. This will help the country to reap the benefits of gst with less retaliation.
There will be a chance of more GST returns at a higher rate by necessity producing businesses which will help the country get out of this recession period. The public will also be relieved from the daily fear of buying necessary goods and will refrain from panic-buying.