Price Relief Lags: Six Weeks After GST 2.0, Consumers Await Full Benefit on Essentials

Price Relief Lags: Six Weeks After GST 2.0, Consumers Await Full Benefit on Essentials

Issue: To assess the effectiveness of the GST 2.0 rate rationalization in translating into commensurate price reductions for consumers, particularly for daily necessities, six weeks after the revised rates came into effect.

Facts:

• The GST Council lowered tax rates on around 80 goods and services from September 22, including sharp cuts on packaged food and medicines (from 12-18% to 5%).
• The GST 2.0 exercise was aimed at boosting consumption and easing household expenses ahead of the festive season.
• The survey by LocalCircles gathered over 53,000 consumer responses across 342 districts.

Decision:

Six weeks after the GST 2.0 rollout, a majority of Indian consumers reported they have yet to feel the benefits of lower taxes on several essential products, highlighting a significant mismatch between the policy-level rate reduction and the actual on-ground retail prices.

Key TakeDowns:

• Essentials Lagging (Food & Medicines):
  • Packaged Foods: Only 13% of respondents reported receiving the full benefit of lower taxes, while a significant 42% reported receiving no benefit at all.
  • Medicines: Transmission fared even worse: 49% of consumers reported no price reduction, despite directions from the National Pharmaceutical Pricing Authority (NPPA). Just 21% confirmed receiving full relief.
• Better Performance in Durables: Higher-value categories showed better, though still imperfect, compliance:
  • Vehicles: 47% of vehicle buyers received the full GST benefit, and 34% received it partially. (This alignment is linked to the strong automotive sales record).
  • Appliances (28% to 18% cut): 33% of consumers saw full benefits, and 33% saw partial relief. However, 28% still reported no change in prices.
• Implementation Challenges (Friction): Retailers often blame the lack of full pass-through on holding old inventory purchased at higher tax rates, warning they risk losses if they cut prices without manufacturer compensation or Input Tax Credit (ITC) support.
• Policy Takeaway: The survey concludes that while the central policy intent was geared toward consumer relief, enforcement gaps and supply chain resistance over who shoulders the short-term revenue impact have created uneven results. The benefits remain “aspirational” for a significant share of households.