GST reduction: benefit fails to reach consumer

Thiruvananthapuram: The consumer is mostly in for disappointment when it comes to the benefits of reduction in GST rates.

Even after the tax component is reduced in the recent GST revisions, many products are sold in the state without any fall in price payable. And to add to his woes, there seems to be no intervention from the state of central governments to ensure that the reduction in tax rates is reflected in the selling prices.

The GST Council recently decided to reduce the tax rates of several items including TV. fridge and washing machine with effect from 27 July 2018. This means that the fastest moving electronic items of Kerala are going to see a tax reduction of 10 %. But going by past experience, such tax concessions are unlikely to be passed to the consumer.

For example, with effect from 15 November last, tax for 195 items was slashed, but the end-buyer stood to gain nothing in that round. The producers, wholesalers and retailers were managing to maintain the same price level by increasing the base price or adding other elements in the price, and getting higher profit in the process. In fact the details of 335 merchants who did not implement price difference in line with reduction in tax rates, were gathered by the State government and submitted to the Centre. But no action has yet been taken.

Only much late did the Centre create the Anti-Profiteering Authority aimed at preventing profiteering. According to the GST Act, only the Authority has the right to take action. The provision is that a screening committee has to be formed at the state level and their information to be passed to the Authority. But even then, recommendations of the screening committee were not acted upon.

Although in last November tax rates were reduced from 28 to 18 %, there are traders who did not reduce the price. Their details were also conveyed to the Centre, again with no result. Of the total alleged violators, 89 were producers, 8 wholesalers and 51 retailers. Further, when tax was cancelled for chicken, that did not bring down chicken prices.

Similar is the case of restaurant prices. They went up when tax rate was hiked, but did not come down when it was reduced. It is significant that the tax reduction is going to be effective in the season of Onam and Bakrid, the time when Kerala's market customarily gets most active. Home appliances like fridge, heater, TV, water cooler, water heater, washing machine and vacuum cleaner - the range of products that get maximum sales in the season - should all start suffering lower tax by 10%; so in theory prices of all these items should come down by 10%, and it remains to be seen if that will become a reality.

In the meantime, the state government is reportedly unhappy about the reduction of tax rates for household equipment from 28 to 18 % as it is estimated to result in a loss of Rs 500 crore to the state exchequer. The government is of the opinion that the items that should have reduced taxes are essential items, such as rice and rice powder. The recent changes were not originally part of the GST council's agenda. And it so happened that the state finance minister Thomas Isaac was not present at the most recent council meeting.