At the initiative of the Union government, the GST Council has agreed to lower the GST rates on most essential and common-use goods. These far-reaching changes, effective September 22, have been scripted to ease the burden on the common man and slow inflation. They are expected to trigger higher consumption and drive economic growth. Therefore, it is imperative that the savings be passed on entirely to consumers and not skimmed off by manufacturers or traders. Any ‘leakage’ in transition would defeat the very purpose of these measures. The government is conscious of the issue—Finance Minister Nirmala Sitharaman has confirmed that various ministries and MPs are working to ensure the tax benefits are passed on.
Some other measures have been put in motion, too. Car showrooms have been told to display boards indicating the old and new prices; it must be appreciated that several manufacturers have preemptively announced price cuts ranging from ₹50,000 to ₹5 lakh on various models. So have some public insurers. However, while it is easy to monitor prices of goods like cars and air-conditioners, it will hurt if the benefit is denied for smaller, essential items. The FM has estimated that as many as 375 essential and common-use goods will benefit from the rate changes, while only 13 items in the ‘sin’ category will be more expensive.
To guarantee the interests of the common man, it is necessary that a well-oiled, multi-ministerial taskforce be set up to monitor retail prices. The monitoring machinery will have to keep a sharp eye on sectors like private health insurance, which works with layers of hidden costs, as well as unscrupulous traders who try and pass off old sticker prices. Setting up an efficient citizens’ reporting mechanism could work wonders, too.
Towards the same end, the government must also pass on savings on imported crude oil. With demand softening due to geopolitical turbulence and the OPEC+ bloc intent on increasing production, it is expected that crude prices will stay below or around the current levels of $65 a barrel in the near term. Earlier, the savings from lower crude prices had been diverted by the government to cover for its fiscal deficit. Hopefully, the new savings will be passed on to consumers if spurring demand and keeping a lid on prices are serious goals.