MUMBAI: The draft Model GST Act, which is being given the final touches by the government, is likely to alleviate a major concern of retailers as the proposed goods and services tax (GST) will be paid on the actual supply price and will factor in discounts given to customers.
Under the revised version of the draft Model GST Act, it is likely that the reference to impose GST on maximum retail price (MRP) on supply to consumers, where the goods were governed by the Legal Metrology (LM) Act, will be removed. A host of packaged goods – ranging from mineral water, footwear to apparel – are covered by the LM Act.
The main challenge with the proposal to levy GST on MRP in the earlier draft of the Model GST Act was that the discounted prices during sales (which retail chains typically engage in, especially during the festive season) would not have been considered. Irrespective of the discounted price paid by the customer, the GST would have been levied on the MRP itself, resulting in a higher tax outgo. Consequently, sales would have become less attractive.
The first step towards ushering in GST is the passing of the Constitutional Amendment Bill. The government is hopeful that the Rajya Sabha will pass it in the budget session. The Model GST Act will be placed in Parliament only after the Constitutional Amendment Bill is passed by the Rajya Sabha and gets the President’s assent.