The Goods and Services Tax (GST) on July 1, 2017, subsumed over a dozen indirect tax. It was hoped that the new indirect tax regime of ‘one nation, one tax’ will keep a check on the cascading effect of multiple taxes. However, a study of price change in selected products show that there has been a mix representation of the increase and decrease of the prices of the goods and that there is no overwhelming evidence to prove if the prices have changed sharply, Care Ratings said in a report.
The GST Council has so far reduced tax rates on 191 items within the 28% slab, leaving just 35 items in the category. Care Ratings compared the prices of commodities on which taxes were cut in the 28th GST Council meeting held on July 21. The changes in prices, however, would be influenced only partly by GST changes and can be due to other factors too such as input cost and taxes, trade, global prices, demand conditions, Care Ratings said.
“With the GST rates being lowered for these products typically one can expect the inflation rates for them to come down under ceteris paribus conditions (other factors kept constant),” the report added. The study showed that prices of items such as paints, refrigerators, deep freezers etc have come down, while prices of colour TVs, varnishes and geysers have gone up.
The year-on-year change in WPI for two periods: June 2017 over June 2016 and June 2018 over June 2017
The GST Council reduced taxes on over 100 items on July 21. This follows tax cuts announced on over 200 items in November 2017 and on 29 items in January this year.