Most consumers still not getting GST rate cut benefits: Survey

New Delhi: While a majority of automobile firms have extended benefits of the cut in goods and services tax (GST) to consumers the pass through in other categories like packaged foods and medicines have been slow partly due to retailers’ reluctance to sell at lower prices without the brands or manufacturers agreeing to make up for their losses, a community survey showed.

In packaged foods and medicines categories only 1 in 10 consumers surveyed confirmed receiving full benefit of GST rate reduction while 2 in 10 received partial benefits in the first week of implementation, as per a survey conducted by LocalCircles, a community social media platform. This means around 70% consumers in this category have not received the benefits of GST rate cut.

During the second week (September 29 to October 5), 40% consumers of packaged food, who participated in the survey, confirmed receiving full benefit of GST rate cut while another 18% received partial benefits.

In the case of appliances, white goods and consumer electronics only 3 in 10 every consumer surveyed confirmed receiving full benefit of GST rate reduction, while another 3 in 10 confirmed receiving partial benefit.

Over 74,000 consumers located in 341 districts participated in the survey conducted through LocalCircles platform.

The pass through of the tax cut benefits has been the best in the automobile category. Around 70% of consumers who bought a vehicle in the first week of implementation of the GST rate cut confirmed receiving full benefit while 2 in 10 confirmed receiving partial benefit.

The government has lowered GST on around 80% of goods and services with effect from September 22. The GST rate on many medicines and packaged food items has been cut to 5% from earlier 18% or 12%, while on a majority of appliances, white goods, consumer electronics and automobiles it has been lowered from 28% to 18%.

The GST rate has significantly boosted sales with major brands and retailers reporting 25 to 100% growth in sales during this year’s Navratri that concluded on October 1 when compared with the last year’s Navratri festival. Growth in sales was led by automobile firms like Maruti Suzuki, Mahindra & Mahindra, Tata Motors and Hero MotoCorp.

While the auto sector continues to lead in passing through the benefits, in the second week there was minor deterioration. In the second week (Sep 29 – Oct 5), there was 24% drop in percentage of consumers getting full or partial benefit of GST rate reduction on vehicles and 20% drop in those who got full benefit when compared with the previous week.

There was a similar trend in appliances, white goods and consumer electronics segments. Compared to the first week, 15% drop was observed in percentage of consumers who confirmed getting full or partial benefit of GST rate reduction, while 10% drop appears on those who got full benefit.

LocalCircles said in a statement that it will urge the authorities to “probe why benefits of GST rate reduction is not being passed on to all consumers.”

“It is also clear that the government will have to more proactively engage with FMCG and medicine brands to ensure that they and their distributors and stockists incentivise the retailers in ensuring that the customer receives the GST reduction benefit on an immediate basis,” it said.