GST 2.0: Car Sales Surge, But Food and Medicine Price Cuts Still Missing

GST 2.0: Car Sales Surge, But Food and Medicine Price Cuts Still Missing

A survey indicates that the Goods and Services Tax (GST) 2.0 rate rationalization successfully boosted sales in the automobile sector during the festive season, but the intended price benefits for daily essentials like food and medicines remain largely elusive for consumers.

Key Findings of the Survey

• Automobile Sales Boost: The GST rate cuts on vehicles, particularly two-wheelers and small cars, directly translated into lower prices and increased consumer sentiment, leading to a strong surge in festive season car sales.
• Missing Price Reductions: Despite tax cuts being implemented on numerous products categorized as daily necessities, a significant number of consumers reported that the final Maximum Retail Price (MRP) for food products and medicines had not decreased proportionally, or in some cases, at all.
• The Transmission Gap: The survey suggests a failure in the downstream supply chain or at the retail level to pass on the full benefit of the reduced GST rates to the end consumer for low-value, frequently purchased goods. This often happens due to existing inventory at old rates or anti-profiteering practices.
• Impact on Affordability: While the big-ticket items became cheaper (boosting economic activity), the lack of price reduction in essentials means the benefit of increased affordability has not fully reached the common public as intended by the government for daily household expenditure.