DC Edit | Will Benefit Of GST Rate Cuts Reach All Citizens?

The revised Goods and Services Tax (GST) slabs, which will come into effect from September 22, are being sold as a festive gift for households. The revised tax slabs will bring down the prices of nearly 400 items by up to 10 per cent. Many of the goods that will have lower tax incidence are everyday necessities and consumer durables. On paper, this should cheer people up during the upcoming festive season. But the real test lies not in policy but in practice — whether these benefits will reach citizens or quietly fatten corporate margins.

The government has rationalised GST slabs and income tax rates in an attempt to boost domestic consumption, which has been sagging in some product categories, especially those aimed at people belonging to the lower middle classes. The need to revive domestic consumption has assumed urgency because of the uncertain global economic outlook and the protectionist measures adopted by US President Donald Trump who raised tariffs on Indian exports by 50 per cent.

Companies are legally bound to pass on the benefit of lower rates to buyers. Yet, history shows that many find ways to dodge this obligation. Traders often claim higher operational costs to justify keeping prices unchanged. Others exploit the inventory loophole — selling stock purchased under old slabs at outdated rates, effectively charging consumers yesterday’s tax. Some companies may raise base prices while cutting tax incidence, creating the illusion of compliance. For the average consumer, this trick is impossible to detect.

On its part, the Narendra Modi government has categorically conveyed to companies that the tax benefit must be passed on to consumers, as the goal of GST rationalisation was to ease the lives of ordinary citizens. It has also threatened penal action against those who fail to comply. However, the danger lies in implementation. The country has several thousand companies selling these products, and monitoring each of them is nearly impossible because of the lack of extensive enforcement mechanisms.

The government’s vigilance must, therefore, be unrelenting. For an interim period of four months, it should make companies disclose pre- and post-GST prices and introduce consumer hotlines. Digital monitoring of billing, real-time reporting, and public awareness campaigns about rate changes should all be deployed aggressively. Consumer forums too must play the role of watchdogs to check profiteering.

Companies, meanwhile, have some genuine concerns over accumulated input tax credits. Whenever rates fall, companies — especially exporters or those facing inverted duty structures — end up with tax credits they cannot immediately use. Refunds are allowed but often delayed, giving firms an excuse to avoid lowering prices. The government, therefore, needs to address this issue immediately, as fast-tracking refunds is crucial to prevent manufacturers’ working capital from getting stuck in bureaucratic rigmarole.

The stakes are high. At a time when household budgets are stretched, every rupee saved matters. If GST reforms are reduced to mere accounting games, public trust in the system will erode further. On the other hand, too much bureaucratic control will hurt the ease of doing business, which must also be avoided. A balanced approach, therefore, may be the key.