GST Rate Cut: Price Reduction on Daily-Use Items

New Delhi, Oct 18 (PTI) As many as 30 of the 54 daily-use items monitored by the government over the past almost a month has seen more-than-expected price cuts post reduction in GST rates, while for others the government will work with the industry to ensure further reduction in retail prices.

Government data showed that while prices of all 54 items have come down since September 22, the actual price cut in case of 24 items was less than the initial estimate of the government.

The government had asked its Central GST field offices to monitor price changes of 54 commonly used items like butter, ghee, cheese, powder, soap and others after lower Goods and Services Tax (GST) rates were implemented from September 22.

As per information received from 21 different CGST zones across the country, 30 items including AC machine, TV set, tomato ketchup, cheese, cement, have seen more-than-expected price reduction.

However, 24 items, including notebooks, chocolates, hair oil, tooth paste, pencil, thermometer, and bicycle, have not seen expected decrease in price based on reduction of GST rate, assuming that all other cost and profit remain constant.

Effective September 22, Goods and Services Tax (GST) have become a two-tier tax structure of 5 and 18 per cent, and a special 40 per cent rate for ultra-luxury items. Prior to this, GST was taxed at rates of 5, 12, 18, and 28 per cent, plus a compensation cess on luxury items.

This has resulted in slashing of prices of as many as 375 items ranging from toothpaste and shampoo to cars and television sets.

As per the government data on monitoring of GST rate on sensitive commodities before and after GST rate reduction, in case of food items more than expected decrease in price based on average price reported by various zones was seen in dried fruits, cheese, condensed milk, jam, tomato ketchup, soya milk drink and drinking water bottle (20L). GST on all these items were slashed to 5 per cent effective September 22, from 12 per cent.

In case of butter, however, there is scope for more decrease in prices. Butter, which was taxes at 12-18 per cent depending on the type, was reduced to 5 per cent. The expected decrease, as per government estimates is between 6.25-11.02 per cent, while the actual decrease has been 6.47 per cent.

Briefing reporters on Saturday, Finance Minister Nirmala Sitharaman said that the benefits of GST rate cut was passed on to consumers by decrease in prices.

For items in which the price cut is not as per estimates of the department, Sitharaman said: "It might have to be brought down a little more for which we will work with them (companies)."

Among food items, less than expected price cuts were seen in ghee, chocolates, biscuits & cookies, cornflakes, ice cream and cakes.

Toiletries like shampoo, toothbrush, talcum and face powder saw more-than-expected decline in prices from September 22, while hair oil, toothpaste, shaving cream and after-shave lotion saw less-than-expected decline in prices.

Similarly, spectacles, contact lenses, geometry box, colour box, erasers, AC machine and TV sets and table and kitchenware saw more-than-expected decrease in prices.

However, for exercise and note books, pencils, crayons, sharpeners, thermometer, and monitors, the price reduction was less than expected as estimated by the GST department.