Despite last month’s GST rate cuts, retailers have not implemented the revised rates citing the need to exhaust old, over-priced stocks
Days after the Goods and Service Tax (GST) council cut the tax rate on 176 items from 28 per cent to 18 per cent, finance secretary Hasmukh Adhia on Monday said that retailers and companies might face stern action if they don’t immediately revise the price of their products in accordance with the revised tax slabs.
The finance secretary further added that retailers and companies – including Fast Moving Consumer Goods (FMCG) companies – cannot continue selling goods at higher prices. The finance secretary’s comments come amid reports that retailers have been selling their products at the same rates which prevailed before the GST council declared its revised taxation on a slew of items, making a majority of them cheaper.
Retailers and several companies have reportedly argued that they would implement the new prices once stocks purchased by them at the earlier prices (under a higher GST slab) are fully exhausted and replaced by products priced according to the new taxation slabs.
In a televised interview to national broadcaster Doordarshan, Adhia said: “We have made provisions for the companies to claim the difference from the government as input tax credit. But I am not willing to accept their argument to postpone passing on the benefits to consumers till they have disposed of their old stocks.”
Adhia said that it is extremely unlikely that the 10 per cent rate cuts, decided by the GST council, won’t make much difference to the customers – especially while buying daily-use products.
“We cannot track each retailer. So we have made it clear to manufacturers like FMCG companies that the onus is on them to ensure the retailers immediately pass on the benefits to the consumers if they want to escape action under the anti-profiteering clause of the GST,” said Adhia.
The finance secretary urged companies to advertise the decreased price on each product. Stating that making the price change visible will depict the corporate governance of the companies, he said, “It is the responsibility of companies to inform their supply chain about the new price, going all the way down from distributors to wholesalers and retailers if they wish to escape the glare of anti-profiteering action by the government.”
Contrary to expectations, the implementation of the GST regime on July 1 has not led to any reduction of prices of goods and services. Several goods and service providers have earlier cited that the high tax slabs have left little room for them to cut prices.
On the reduced GST rates on restaurants, Adhia said, “It made sense to take them out of the input tax credit chain. I would expect very few claims to emerge from there for anti-profiteering action. Competition should take care of anyone who tries to spike prices.”