A survey by India’s citizen engagement platform LocalCircles indicates that despite recent cuts in Goods and Services Tax (GST), a significant share of consumers are not receiving the full benefit at the point of sale, particularly in packaged foods, medicines and consumer electronics.
LocalCircles said in its report that the survey, conducted during the second week after the GST 2.0 rate overhaul, received over 74,000 responses from citizens across 341 districts in India. The platform said 64 per cent of respondents were men and 36 per cent were women, with 41 per cent from tier 1 and 2 cities, 29 per cent from tier 2, and 30 per cent from tier 3, tier 4, tier 5 and rural areas.
Under the revised GST regime introduced on 22 September, the government reduced rates for about 80 goods and services, adopting a two-tier structure of 5 per cent and 18 per cent, while classifying luxury and sin goods under a 40 per cent slab.
In packaged foods, 40 per cent of respondents said they received the full benefit of the lower tax in the second week, and an additional 18 per cent said they got a partial benefit. In comparison to the first week after implementation, LocalCircles notes this marks an 80 per cent increase in the share of consumers reporting full or partial benefit, and a 300 per cent jump in those reporting full benefit.
In the medicines segment, only 16 per cent of consumers said they obtained the full benefit of the tax cuts, while 44 per cent received a partial reduction. The proportion saying they got no benefit fell from 62 per cent in week one to 28 per cent in week two, according to the survey.
In appliances, white goods and consumer electronics, just 23 per cent of respondents reported receiving full benefit, while 34 per cent reported partial pass-through. LocalCircles noted a 15 per cent drop in the combined share (full or partial) compared to week one, and a 10 per cent decline in those reporting full benefit.
In the vehicles sector, the picture was somewhat better: 55 per cent of those who purchased vehicles said they had received the full benefit of the rate cut, and 21 per cent said they received partial benefit. However, this still represented a 24 per cent drop in the combined full/partial share from week one, and a 20 per cent drop in those reporting full benefit.
LocalCircles suggested that reluctance among retailers to reduce prices without assurances from brands or manufacturers is slowing the pass-through of benefits to end consumers. The report cites instances where online sellers continued to list goods at pre-cut maximum retail prices (MRP), and physical retailers refused to discount, despite the tax changes.
The platform said it will share the findings with the government and urged authorities to probe why full benefits are not being passed across all four surveyed segments: packaged foods, medicines, appliances and electronics, and vehicles. It further called on the government to engage more proactively with FMCG and pharmaceutical brands, distributors and stockists to ensure that retailers are incentivised to pass on the GST reduction to consumers immediately. |
