The government has signalled that the industry should pass through the GST cut benefits on to the retail prices, but it does not want to create another ‘inspector raj’ to enforce it, Sanjeev Sanyal, Member of the Economic Advisory Council to the Prime Minister has said.
"The expectation is that they (businesses) will (pass the rate cut benefits). But let's see how that works out. I think the signal has been given by the government that it should be allowed to pass through," Sanyal told Moneycontrol in an interview.
The GST Council, on September 3, approved a rate reduction on over 300 daily use items, coming into effect from September 22. Most FMCG products would fall under the GST slab of 5%.
In the last few days, many consumer goods companies, namely P&G, HUL, and ITC have announced price cuts on a range of products including shampoo, toothpaste, razors etc.
Major automakers also have announced significant price cuts across models following the government’s decision to rationalize GST rates on automobiles. Customers can now expect savings ranging from Rs 60,000 on entry-level cars to over Rs 3 lakh on premium SUVs.
Sanyal, however, said the government doesn’t want to "create another Inspector Raj to try to enforce it".
"…this will to some extent have to be done by public pressure," Sanyal added.
"We'll see how it goes. But, you know, I have very little sympathy other than the minor issue of labeling. So, you've already printed, and the product is in the supply chain. Maybe it can go but that is a transition issue. Beyond that, I have no sympathy about the matter because if you are taxing something less, they should pass it on. What argument is there about not passing it on?," Sanyal asked.
On September 5, Finance Minister Nirmala Sitharaman had told Network 18 in an interview that many citizens have raised this issue (of passing GST cuts benefits to citizens). "We’ll have to keep talking with industry, we’ll have to nudge them," she had said.
That said, leading FMCG companies recently told the Central Board of Indirect Taxes and Customs (CBIC) that they cannot cut retail prices of low-value products in line with GST reductions, arguing that further price cuts would make transactions inconvenient for consumers, Moneycontrol had reported last week.
Sanyal added that GST 2.0 has eased out the compliance processes as well. "There were all these things…over time, the old license permit Raj had quietly come back. So, some amount of Inspector Raj was there in terms of GST notices."
On the registration of new businesses to GST, the EAC-PM Member said that since 2017, the entire process had become ‘complicated’, and the government heard lots of complaints about it even as the idea was to ‘quickly’ allot the registration number to new entrants. The GST 2.0 reforms ensure that the new businesses are registered within three days.
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