GST reforms in focus: Ensuring consumer benefits from tax rate adjustments

New Delhi: The Centre is closely monitoring whether companies are passing on the benefits of recent Goods and Services Tax (GST) rate cuts to consumers, with enforcement measures to be considered only after field reports are analysed by the end of September.

“We are awaiting inputs from field formations by the end of this month. We cannot have knee-jerk reactions to fresh reforms; they need time to settle,” a government source said.

Over 50 products across various categories are under review, and nationwide retail pricing data is being collected. Preliminary monitoring suggests the tax cuts are already reflected in prices in nearly 90 per cent of sectors.

While smaller retailers and unregistered dealers may take longer due to existing inventories, larger companies, particularly in the cement, automotive, and e-commerce sectors, are expected to lead the transition. Older stock remains unaffected, though luxury brands are passing on reductions for new stock.

“The entire value chain will eventually show gains, even though unregistered dealers may not be able to pass the benefit immediately,” an official source said.

Officials are also addressing the issue of inverted duty structures, where input taxes exceed taxes on finished goods, leading to blocked credits. “We are planning an automatic refund system for inverted duty, for which an amendment will be made,” sources said.

With consumer demand typically peaking during the upcoming holiday season, the effects of the GST rate reductions are expected to become more apparent. Enforcement action, if needed, will only follow once sufficient field evidence is available.

The monitoring exercise follows the government’s GST 2.0 reform, which reduced the indirect tax structure to two slabs, 5 per cent and 18 per cent, replacing the earlier multi-tiered system. The GST Council also approved a 40 per cent tax slab for sin and luxury goods, including tobacco, aerated drinks, and premium vehicles, at its 56th meeting earlier this month.

IANS