GST – A WORK-IN-PROGRESS POLL TOOL

By Ruma Dubey

The weekend was made extra special by the Govt – it slashed the GST rates on more than 50 goods and this is estimated to lower the revenue by around Rs.15,000 crore each year.

But hey, taking this hit is much better than losing it all in the upcoming elections – that’s precisely the sole reason for this largesse. Driven purely by the need to placate frayed nerves in the state and central elections, this GST reduction is one more from the bag of tricks. As we near 2019, lets enjoy the most while it lasts!

The new GST rates are effective July 27 and the panel will meet again Aug. 4 to discuss issues faced by small businesses. 

The impact of these rate cuts are evident on the stock market today as the FMCG sector is doing the best. The S&P BSE FMCG sector rose over 2.3%. The paint stocks are also doing very well as the rate cut for them too bodes well.

This rate cut could not have come at a more opportune time – once harvest money comes in, it is this sector which will see the maximum positive impact. Thus the rate cuts will boost demand to some extent.

Besides FMCG products, Electronic appliances such as refrigerators, washing machines, small screen televisions, vacuum cleaners water heaters, hair dryers, hair trimmers, water coolers saw a reduction in tax. Thus white good stocks too are also on the positive radar today.

To aid the growth of electric cars and bring down emissions, GST on lithium-ion batteries was also brought down from 28% to 18%. Tax on e-books has come down from 18% to 5%.

GST on bio-fuel pellets and ethanol was also toned down from 18% to 5%. There was major relief for hotels and travellers, as GST will now be levied on the actual bill and not on the card rate.

The GST, for now, seems to be a work-in-progress; it is constantly tinkered and repaired. And as polls come calling, they seem to have become the best tools of campaigning. One can say that people know it is an election gimmick but then, it is not something which is going to be withdrawn, right? The benefit is here to stay and this will matter in the long run. It’s just sad that the timing is always around polls.

But like the much tom-tommed hike in MSPs for farmers, not all the benefits of the GST cut might get passed on to the consumers. For many, the input costs and sometimes, the tax on inputs will remain much higher than the price at which they will now sell to the consumer. Unless refunds start coming in soon, which is the bone of contention for most in the GST regime, many tax cuts might end up being much smaller than what was given on paper.

Blame it on elections or whatever, this GST cut on some items is most certainly a good move. At least that it what the markets think too!