GST Cuts Don’t Always Benefit Consumers: Kerala Government Study
According to a study by the Kerala Ministry of Finance, reductions in the GST rate have not benefited the public. A group of seven members of the GST Council, led by Karnataka Chief Minister Basavaraj Bommai, peruse the study.
Kerala Finance Minister KN Balagopal has reportedly asked GoM that the tax structure not be revised without a proper study.
The study quotes the prices of about 20 products as saying that they got more expensive even after the GST rates were cut. The trend can be seen in the prices of products such as washing machines, vacuum cleaners and wristwatches, he says.
For example, in the category of primary cells and primary batteries, the TPS rate of the SF car battery, 32 amps, was 28% and the TPS council meeting held in Guwahati on November 10, 2017 had it reduced to 18%. But the rate increased by 100. Its price was 2,000 yen in July 2017 and in January 2018 it rose to 2,100 yen. Likewise for SF Bike Battery, the tax rate fell 10 percent when it was lowered to 18 percent, but prices increased by 100 yen.
For wristwatches, the study found that despite lowering the GST to 18% from 28%, it increased by 260. For articles and equipment for general physical exercise, gymnastics, athletics also, the lowering of the rate did not help consumers. The prices of lighters, kitchen gas lighters and granite (other than blocks) have also increased.
For products such as washing machines from IFB, Samsung and LG and similar brands, a 10 percent drop in the tax rate did not lead to a price change soon after the decision in Guwahati. .
But the prices of these products increased significantly after three years, the study notes. For vacuum cleaners, too, the price did not change immediately, but increased after three years. Paints and varnishes, digital cameras and camcorders, chocolates and food preparations containing cocoa, soft drinks, perfumes, toiletries and bath and shower products have also increased after a few years. reduction in the tax rate.
“No gain for buyers”
A senior Kerala government official said Activity area that their study found that tax rate changes are not being passed on to the population at least in some areas in a proportionate way. “We are also in favor of maintaining the neutral rate on income. But any increase in the tax rate should come with proper study of its impact. Our assessment is that the benefits of the lower rates have gone to large producers rather than consumers, ”the official added.