Confusion over GST prevails, this festive season gift hampers may cost you dear

Shopkeepers are not clear about the new tax rate applicable on a basket containing assorted goodies with different tax slabs under the goods and services tax regime.

india Updated: Aug 07, 2017 09:06 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times, New Delhi
Gifts,Gift Hamper,GST
Many shopkeepers do not have any clarity on tax rates, especially for gift hampers containing different items. (HT file photo)

As the festive season kicks in this year, people may have to pay a lot more for gift hampers they buy.

Shopkeepers are not clear about the new tax rate that is applicable on a basket containing assorted goodies with different tax slabs under the goods and services (GST) tax regime.

Ankit Gupta, owner of Radha Krishna General Store at Bengali Market in New Delhi, said he is charging taxes for all items packed in their gift baskets.

“We have started designing our own gift baskets for Rakhsha Bandhan and we are charging separate GST rates for separate items and adding them up for to fix the final price… while the purchases will peak during the Diwali time, we are apprehensive that people may not want these baskets as they will be more expensive than earlier,” Gupta told Hindustan Times.

There are several shopkeepers like Gupta, who do not have any clarity on the tax rates, especially for “mixed supply”.

Gift hampers containing different items are classified as “mixed supply” and should typically be taxed at the highest rate of GST tax for any of the items in that pack.

So, a gift basket containing biscuits taxed at 18% and chocolates taxed at 28% will attract a GST of 28%. But, the message has not trickled down to the shop-owners. Typically, a basket with a variety of items that was taxed at a flat 12% including a value added tax (VAT) component could well be taxed at 28%.

According to an internal report of consulting firm KPMG, the ambiguity “holds potential for creating enough disputes and litigation.”

“There is a lot of confusion on the GST rates for gift packages containing different items and people will have to pay more this year… these discrepancies need to be addressed by the government before the festive season kicks in,” Waman Parkhi, partner, indirect tax, KPMG told Hindustan Times.

The Confederation of All India Traders (CAIT) said that the problem is even more acute in smaller towns.

“If there is confusion among merchants in the capital, one can imagine what the problem will be in the smaller towns… there is no clarity and people will have to land up spending much more,” said Praveen Khandelwal, secretary general of CAIT, adding that the issue has been raised with the government.

While there are four main tax slabs under GST — 5, 12, 18, 28, in reality there are many more.

Certain products such as food grains come under nil rate and a few items like tobacco and aerated drinks attract 28% along with cess.

“Multiple rates breed classification disputes,” the KPMG report said.

Though sources said that these issues are being considered by the government, analysts said that this needs to be addressed at the earliest as people’s spending increases during the season. “We will look into all issues raised but immediately the focus is on looking at rationalizing tax rates for a few items,” said a government official.

First Published: Aug 07, 2017 07:55 IST