Government may form framework to pass on GST reduction to consumers

New Delhi: The Finance Ministry may explore a clearly-defined broad framework to ensure that cuts in GST rates benefit consumers. The fresh initiative is being considered in the wake of rising complaints against companies that are found tweaking rules to avoid lowering prices.  At present there is no prescribed method under the GST law to deal with the issue. Absence of compliance regulations prevents corporates from immediately passing on the benefits. The new framework within the GST law is on the anvil but a final call would be taken in consultation with the stakeholders, said sources.

If the ministry indeed decided to go for the changes, the new framework may stipulate timelines within which the rate cut benefits would have to reach consumers. This would especially be enforced for products that are already in the market. Moreover, companies may be barred from making changes in product packaging and weight to escape price cuts. It has been observed that companies often increase the weight of their products where GST rate was reduced rather than enforcing a price cut by proportionate percentage, the sources added.

For products floating in the market, passing on duty benefit entirely depends on the distributors or retailers. It is not in the hands of manufacturers who actually avail the input tax credits based on the MRP of a product printed before any GST rate cut is announced. Although there is an anti-profiteering authority (NAA) to ensure GST rate cut benefits reaches the common man, several of its decisions to impose penalty on erring corporates have been legally challenged.

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Free Press Journal