Restaurants not passing on GST rate cut benefits, feel half of Indians; don’t trust FMCG brands too

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Published: April 24, 2019 11:59:06 AM

Respondents say that these businesses have raised base prices to avoid passing on the benefit of the tax rate cut to consumers.

Govt has passed three major rate cuts till daye.

The government has passed three major GST rate cuts since 2017 with the most recent cut introduced in January 2019, yet the vast majority of the country is yet to see the benefits of reduction in the Goods and Services Tax rate, says a survey report. Almost half the population says that restaurants have not passed on the benefit of GST rate cuts, whereas nearly half also suspects the same about FMCG firms. Respondents say that these businesses have raised base prices to avoid passing on the benefit of tax rate cut to consumers, according to a survey by LocalCircles.

On the flip side, about 33% of Indians have begun to see the benefits of GST rate cuts. “It appears that finally, a third of the consumers are starting to see the benefits of the GST rate reductions… the trends are finally showing signs of increased compliance by brands,” says the LocalCircles report.

Reluctant restaurants

As the base price of the food is increased, half of the respondents said that they are not benefited by the GST cuts. Out of 16,000 of those surveyed, 47% said that restaurants have not passed on the reduced tax benefits to them. 15% were of the opinion that partial benefits are being transferred while 19% of them were unsure. Notably, the GST cut on the restaurant was one of the earliest cuts in line after the GST was introduced in mid-2017. In November 2017, GST on restaurants was reduced from 18% to 5%.

FMCG mistrust

Customers have a mistrust of shampoo, cosmetics and groceries brands as well with almost half of the respondents opine that brands are not passing on GST benefits to them. “45% said no benefits were being passed as the base price of products has been increased,” LocalCircles report said. Less than 10% of the population surveyed replied in positive that brands are transferring GST benefits. In November 2017, GST on many FMCG products was downed to 18% from the previous 28%.

Also, while the GST was reduced from 28% to 18% (in July 2018) on items such as paints, home appliances and televisions, 40% of the respondents said that no benefit is given to them. Increase in base price was mentioned here as well.

Recently, major FMCG company Procter and Gamble (P&G) came under the anti-profiteering radar with it found guilty of not passing Rs 250 crore worth of GST benefits to its customers. The case has been submitted to National Anti-Profiteering Authority which will review it.

However, LocalCircle maintained that the situation is improving with “many white goods and FMCG brands are showing improvement in passing GST rate cuts to consumers. This is a positive trend,” LocalCircles report said.

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