GST Rate Cut: Consumers Yet to See Full Benefit as Small Retailers Sell at Old Prices - CAclubindia

Nearly a month after the government's latest GST rate cuts came into effect, consumers may still find several packaged goods being sold at old prices, especially in smaller retail outlets across India.

While major FMCG companies have promptly revised their prices and publicised full pass-through of the tax reductions, officials monitoring implementation say that small and unorganised retailers, many of whom operate outside the GST network, continue to be the weak link in ensuring that consumers actually receive the benefit.

According to officials tracking post-reform price trends since 22nd September, some small retailers are still selling old inventory at the pre-cut Maximum Retail Prices (MRPs) rather than revising them to reflect lower GST rates. Although businesses are required to affix new price stickers reflecting the revised rates, compliance among unorganised retailers remains limited.

"Once their existing stock carrying prices prior to the GST rate cut are exhausted, they will also be selling at reduced prices. We expect full pass-through of benefits by December," an official familiar with the development said."However, we cannot take legal action against unregistered retail stores, as they are not part of the GST system," the person added.

Currently, only merchants with an annual turnover above Rs 40 lakh are mandated to register under GST, or Rs 20 lakh in case of inter-state sales, leaving a significant portion of small traders outside its ambit.

Government Monitoring and Market Dynamics

The CBIC, along with state GST authorities, continues to monitor the transmission of GST rate cuts to retail prices. Monthly reports are being submitted to the CBIC, tracking price movements across essential goods and services.

Officials expect that once the supply chain adjusts and revised inventory reaches smaller markets, competitive pricing will naturally stabilise.

"Large companies have already passed on the benefits to consumers. Market dynamics will ensure prices stay competitive, even though the government cannot legally enforce the new rates indefinitely," said another person aware of the matter.

After a six-month monitoring period, the government is expected to step back, as businesses have pricing freedom in a market economy. Officials believe that if prices remain lower during this period, the objective of the GST rate reduction will be considered fulfilled.

FM Sitharaman: Benefits Passed to Consumers

Finance Minister Nirmala Sitharaman recently affirmed that the government has been tracking 54 essential consumer items to ensure price reductions are reflected on the ground.

"Not in one case has the benefit of tax reduction not been passed on to consumers," Sitharaman said.

The Role of Unorganised Retail and CAIT's Awareness Drive

India has approximately 73 million unincorporated enterprises, with only 15 million registered under GST, underscoring the scale of informality in the retail economy.

The Confederation of All India Traders (CAIT), representing over 90 million traders and small businesses, has extended its support to the government's efforts. The association has launched a nationwide awareness campaign to educate traders about the revised GST rates and the need to adjust retail pricing accordingly.

"CAIT has issued advisories to all its state and local trade bodies urging traders to re-label or display revised prices wherever feasible," the organisation said, adding that it continues to collaborate with GST authorities to help small vendors align with the new framework.

The trade body expects that as existing stocks are sold off, the benefits of the tax rate cut will fully reach end consumers.

"We are confident that full pass-through of GST benefits will take place in the coming months. CAIT remains committed to ensuring that both traders and consumers benefit from these reformative measures," the association added.

Conclusion

While the GST rate cuts have already started translating into lower prices in organised retail chains, the unorganised sector continues to pose challenges in ensuring uniform implementation. Policymakers are optimistic that as old inventories phase out and awareness spreads, the benefits of India's latest GST reforms will be fully realised across the retail landscape by the end of the year.