Economy

GST cuts do not always benefit consumers: Kerala govt study

A. M. Jigeesh | | Updated on: Dec 06, 2021
image caption

Tells GST Council that tax rates should be based on a proper study of impact

According to a study by the Finance Ministry of Kerala, GST tax rate reductions have not benefited the public. A seven-member Group of Ministers of the GST Council, headed by Karnataka Chief Minister Basavaraj Bommai, is perusing the study.

Kerala Finance Minister KN Balagopal is learnt to have demanded in the GoM that the tax structure should not be revised without proper study.

The study cites the prices of about 20 goods to say that they have become costlier even after reduction in GST rates. The trend can be seen in the prices of products such as washing machines, vacuum cleaners and wrist watches, it says.

For example, in the category of primary cells and primary batteries, the GST rate of SF Car Battery, 32 Amps, was 28 per cent and the GST council meeting held in Guwahati on November 10, 2017 reduced it to 18 per cent. But the rate increased by ₹100. Its price was ₹2,000 in July, 2017 and in January, 2018 it increased to ₹2,100. Similarly for SF Bike Battery too, there was a 10 per cent decrease in the tax rate when it was brought down to 18 per cent, but the prices increased by ₹100.

For wrist watches, the study found that despite a decrease to 18 per cent from 28 per cent in GST, the increased by ₹260. For articles and equipment for general physical exercise, gymnastics, athletics too the decrease in rate did not help the consumers. Prices of cigarette lighters, kitchen gas lighters and granite (other than blocks) also increased.

For products such as washing machines of IFB, Samsung and LG and similar brands, a 10 per cent decrease in the tax rate did not result in price change soon after the decision taken in Guwahati.

‘Benefits manufacturers’

But the prices of these products increased significantly after three years, the study noted. For vacuum cleaners too the price did not change immediately, but increased after three years. Paints and warnishes, digital cameras and video camera recorders, chocolates and food preparations containing cocoa, non-alcoholic beverages, perfumes, toiletries and bath and shower products have also shown an increase after a couple of years of reducing the tax rate.

‘No gain for buyers’

A senior Kerala government functionary told BusinessLine that their study revealed that the changes in rate of tax do not transmit to the people at least in some sectors in a proportionate manner. “We are also for maintaining the revenue neutral rate. But any increase in the tax rate should be done with a proper study of its impact. Our assessment is that the benefit of decreased rates have gone to big producers than the consumers,” the official added.

Published on December 06, 2021

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