Centre monitoring GST rate cuts to ensure benefits reach consumers
What's the story
The Indian government is keeping a close watch on the transmission of recent Goods and Services Tax (GST) rate cuts to consumers. Senior officials have said that no action will be taken until field inputs are analyzed by September 28. Over 50 products across various categories are under review as part of the government's ongoing monitoring exercise, following the decisions made at the 56th GST Council meeting earlier this month.
Sector response
Big businesses leading the transition
Initial monitoring indicates that nearly 90% of sectors are already reflecting the tax cut in their pricing. However, unregistered small retailers are likely to take more time until their old stock clears. Big businesses such as cement and automobile firms are expected to lead this transition, with e-commerce platforms also being closely monitored for compliance.
Inventory impact
High-end brands adjusting prices
High-end brands have already started passing on tax cuts in new stock. However, officials have warned that older inventories and unregistered dealers may not reflect this change immediately. The government believes that the entire value chain will eventually show benefits from these reforms, despite some initial hiccups with older stocks or unregistered dealers not being able to pass on the benefits of GST rate cuts.
Structural challenges
Addressing structural challenges
The government is also looking at structural challenges such as inverted duty structures, where taxes on inputs are higher than those on finished products. This leads to blocked credits. To address this issue, an automatic refund system is being planned, and an amendment will be made accordingly. The impact of rate cuts is expected to be more visible during the upcoming festive season when consumer purchases peak.