Profiteering casts a cloud over GST cuts

Caution stems from many cos hiking prices after previous tax cuts

- Gireesh Chandra Prasad

The spectre of profiteering is holding back a new round of tax cuts, as the federal council for indirect taxes fears businesses will pocket the savings instead of passing them on. At stake is lower taxes on insurance premiums and an end to the 12% GST slab, two proposals that have gained broad support in recent times.

The caution stems from the previous experience of some real estate, multiplex and consumer goods companies raising prices when taxes were cut, denying benefit to the consumer, two people familiar with the matter said. The national anti-profiteering body formed as an interim measure to check such practices was wound up in November 2022, and no suitable alternative is in place yet.

"The ways of ensuring that businesses pass on the benefit of tax cuts to the consumer will get built into any decision on further lowering taxes. The council will ensure that the benefit will be passed on to consumers, or there will be no tax cut. If businesses cannot ensure that the tax relief meant for the consumer is passed on to them, why should the exchequer sacrifice revenue that could be used for welfare and development?" said one of the persons quoted above, who spoke on the condition of anonymity.

Queries emailed to the finance ministry and the GST Council Secretariat on Friday seeking comments remained unanswered.