The two-slab GST will be beneficial only when consumers receive the full monetary benefit envisaged by the tax reforms.
While the two-slab GST should be welcomed wholeheartedly, important goals like enhancing domestic consumption and ensuring speedy economic growth may remain unfulfilled if the governments, both the Centre and the states, fail to prevent profiteering. The government must ensure that this historic step, described by Prime Minister Narendra Modi himself, benefits the consumers most, as they are the real driving force of any economy. The government should learn from past instances when measures intended to reduce the burden on the common people failed to deliver results because manufacturers tried to pocket all the profits. This time, the government must remain vigilant against this particular section, who always put personal interests ahead of national interests.
This is important because even after easing taxes by the GST Council, there is no guarantee that consumers will be the sole beneficiaries. There is a strong possibility that ordinary people may be denied the benefits if manufacturers and retailers do not properly reciprocate. For instance, a tax cut of INR 10 on certain goods should mean a reduction of the maximum retail price by the same amount. It is unethical as well as impermissible by law for manufacturers or retailers to keep either the entire amount or a part of it. The two-slab GST will be beneficial only when consumers receive the full monetary benefit envisaged by the tax reforms.
There are many instances in our country when profiteering buried welfare measures announced for the sake of the common people with the aim of boosting economic growth. The reduction in corporate tax rates is one such example, which shows how profiteering undermined the government’s good intentions. When the country’s economy contracted by nearly 25 per cent during the COVID-19 pandemic, the government announced various sops, including a reduction in corporate tax rates, to bring the economy back on track. The expectation was that the excess funds would be invested in the market to create new assets and strengthen the economy. But business houses made no new investments and instead used the sop either to adjust books or to invest abroad in search of secure returns. In fact, it has become common practice for the Indian business lobby to demand benefits from the government without giving anything back in return.
On its part, the government has assured that after the introduction of the new GST rates on September 22, it will remain watchful for the next 90 days to prevent any attempt at profiteering. Union Finance Minister Nirmala Sitharaman has already discussed the issue with industry leaders, who have vowed to pass on the entire benefits to customers. Hopefully, good sense will prevail and help both the country’s economy and its people reach new heights.