Fireworks makers find ingenious ways to avoid paying higher GST

A section of fireworks industry spread over Virudhunagar, Tirunelveli and Thoothukudi districts seems to have altered the rules of the game this Deepavali in the GST regime. The goal posts have been pushed back in the marketing game with the objective of increasing sale without burning a hole in the pocket of the end user.

Even as there is a consistent demand for the reduction of the GST on fireworks from 28% to 12% or 18%, many units have found a way out. In the retail market in Sivakasi, it is easy to buy crackers without a bill or with an unsigned invoice in a majority of shops. For example, an invoice for a purchase of ₹4998 at an outlet with a “turnover below exemption limit under TNVAT Act 2006” shows the actual cost at ₹3674, after a discount of 30% and no GST.At the manufacturer’s end, a discount of 39% (₹66,337.50) has been provided for goods worth ₹1, 70, 098.50 sent to Ranchi. In another case, a discount of 40% (₹65920) has been offered for goods valued at ₹1, 64, 800. A leading manufacturer has charged ₹6534.81 as sundry packing cost for goods worth ₹6484.80 and offered a discount of ₹4539.36. In all these cases, GST has been levied for the discounted price. In another consignment sent to Muzaffarpur, billing has been made for only 50% of actual cost.

Industry leaders acknowledge that many manufacturing units and retailers are adopting devious practices to overcome the GST burden. “It is practically difficult to pay GST at 28%, especially when licensed units are facing tough competition from illegal manufacturers and illegally imported Chinese crackers. They do not pay any tax and their products are obviously cheaper and attract buyers,” said Tamil Nadu Fireworks and Amorces Manufacturers’ Association secretary K. Mariappan. The 10-day strike by the industry against 28% GST has not evoked any positive response from the Union government. “We had warned the Government that higher tax rate will only lead to tax evasion,” he pointed out.Post-GST, all check posts in borders of States had been removed. The government allowed fling of GST returns for July till October 10. And these factors came to the advantage of tax evaders. Besides, an elaborate safety procedure for handling explosive materials would also discourage officials from checking truck load of fireworks, sources said.

Some of the devious practices, according to insiders, are suppression of value of goods by one sixth to one fourth of actual value; abnormal discount; packaging more items (double) in a carton and charging for half; sale without bill; manufacture of fireworks beyond permitted limits and using a single invoice to load four or five trucks. Units that play by the rules are the worst hit as their products cost higher and discounts are minimum. They feel that reducing GST rate will curb malpractices besides increasing revenue to the government. Simultaneously, surveillance should be stepped up in manufacturing units, godowns, lorry sheds and retail shops. They also insist that discount should be pegged at 20%

Source:http://www.thehindu.com/news/national/tamil-nadu/fireworks-makers-find-ingenious-ways-to-avoid-paying-higher-gst-sivakasi/article19834917.ece

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