Initial Disappointments Emerge
Soon after the implementation of GST 2.0, concerns emerged about whether the intended benefits of lower taxes were actually reaching Indian consumers.
Reports surfaced regarding instances of outdated MRPs appearing on online platforms, along with retailers selling old stock at pre-GST rates. These issues created initial disappointments, as consumers did not experience the expected decrease in prices despite the government's efforts to make goods more affordable.
Survey Insights Unveiled
The LocalCircles survey, spanning over 27,000 individuals across 332 districts, shed light on the varied impact of GST cuts across different product categories. The survey assessed the price changes on items such as packaged foods, medicines, appliances, white goods, consumer electronics, and vehicles. These findings provide a comprehensive look into how GST 2.0 changes have influenced consumer spending habits across the country. The survey highlighted a lack of uniformity in the implementation, with only a few segments demonstrating substantial pass-through savings to buyers.
Impact on Key Sectors
The survey results show diverse effects across different sectors. For example, the automobile segment showed the most successful pass-through to buyers, with around 76% of car buyers reporting the full advantage of lower GST rates, and 24% receiving partial benefit. In contrast, the FMCG and medicine sectors faced significant implementation challenges due to the millions of retail points involved, causing complexities in last-mile compliance. These disparities indicate a need for more tailored strategies within various sectors to facilitate the effective distribution of GST 2.0 benefits and ensure uniform consumer experiences across India.
Medicines and Packaged Foods
Consumers buying medicines and packaged foods experienced minimal relief. Only 10% of buyers of medicines received the full benefit of the GST reduction, while 24% received partial relief, and over 60% still paid the same prices. Similarly, packaged foods showed a similar pattern, with a mere 10% of respondents reporting that they received the full benefit of the tax cut, whereas 21% received partial relief. These figures indicate considerable gaps in the implementation of GST 2.0, particularly in the pharmaceutical and packaged food sectors, which impacts the availability of cost savings.
White Goods and Appliances
White goods, consumer electronics, and appliances saw a more positive, though still incomplete, pass-through of tax benefits. Approximately 34% of consumers reported receiving the full GST reduction, while another 33% experienced partial benefits. This indicates that in these sectors, the implementation of the tax cuts has been more successful, yet there is still room for improvement to ensure the benefits are completely received by the intended consumers. The variations across sectors highlight the importance of addressing unique supply chain and compliance issues to maximize the positive impact of GST 2.0.
Supply Chain Challenges
The survey emphasizes that brands and manufacturers need to strengthen supply chain coordination to assist smaller retailers in passing on benefits without incurring inventory losses. These difficulties underscore the need for proactive strategies that would address the complex dynamics of product distribution and pricing management. Effective coordination is crucial, specifically to prevent losses incurred by smaller retailers, and enable the successful implementation of GST 2.0 across various segments. Unless such improvements are made, the benefits of the policy will remain largely aspirational for most Indian consumers.
Policy Intent vs. Reality
GST 2.0 reforms aimed to make approximately 80 goods and services more affordable, including reducing rates on essentials like paneer and UHT milk to 0-5% and certain medicines to 5%. For aspirational goods such as cars and electronics, tax cuts were also implemented, dropping the rate from 28% to 18%. However, the findings show a significant discrepancy between the policy's objectives and the actual experience of consumers. Many retailers have not fully updated their prices, thereby negating the intended effect of the reforms and resulting in a disparity between the benefits aimed at consumers and their actual realization on the market.
Key Takeaways and Outlook
The study indicates a critical need for improved enforcement and retailer cooperation to translate GST 2.0's tax reforms into tangible relief for Indian buyers. While the policy has the potential to boost affordability and consumption, without robust execution, its impact could be limited. The need for effective enforcement to monitor pricing practices, combined with efforts to educate and assist retailers in updating prices, is essential for bridging the gap between policy intent and consumer outcomes. Continued monitoring and strategic adjustments will be critical to ensuring the successful implementation of GST 2.0 and its benefits reach the intended beneficiaries.
