The CEO of Dabur India has stated that companies will pass on the benefits of the Goods and Services Tax (GST) rate cut to consumers, which will lead to an increase in consumption. This statement was made at a Confederation of Indian Industry (CII) event, where the CEO expressed confidence that price reductions will take place once the new GST rates are in effect. The 56th GST Council meeting recently approved an overhaul of the indirect tax system, introducing a standard rate of 18% and a merit rate of 5%. A special de-merit rate of 40% will be applied to select goods and services.
Most daily use items will now be in the 5% slab, and the classification issues that existed earlier have been largely resolved. The CEO cited the example of popcorn, which had different tax rates depending on whether it was sold loose or pre-packed and labelled. Under the new regime, popcorn mixed with salt and spice, as well as caramel popcorn, will attract a 5% GST rate. The older rate structure had been criticized for its complexity, but the new rates aim to simplify the system.
However, the CEO noted that the “inverted duty structure” problem is not fully resolved. This refers to the fact that the industry has to pay 18% GST on services such as warehousing and media costs, but the end-product only attracts a 5% GST. As a result, companies do not get input tax credit on these services, which can increase their costs. The CEO hopes that these issues will be addressed in the future.
The GST rate cut is expected to boost consumption, as companies pass on the benefits to consumers. The new rates aim to simplify the tax system and reduce complexity, which should make it easier for businesses to operate. The CEO’s statement suggests that companies are committed to passing on the benefits of the GST rate cut to consumers, which should lead to increased demand and economic growth. Overall, the new GST regime aims to create a more streamlined and efficient tax system, which should benefit both businesses and consumers.