While automobile companies have largely passed on the benefits of the recent GST rate cut to consumers, categories like packaged foods and medicines have seen slower pass-through, according to a LocalCircles survey. Retailers' reluctance to reduce prices without compensation from brands or manufacturers is cited as a key reason.
The survey, conducted with over 74,000 consumers across 341 districts, found that in the first week of implementation (September 22-28), only 10% of consumers in packaged foods and medicines received the full benefit of the GST rate cut, while another 20% received partial benefits. This implies that around 70% of consumers in these categories did not enjoy any price reductions.
In the second week (September 29-October 5), the proportion of consumers receiving full benefits in packaged foods rose to 40%, with 18% receiving partial benefits.
Appliances, White Goods and Consumer Electronics
For appliances, white goods, and consumer electronics, only 30% of surveyed consumers received the full benefit of GST reduction, while another 30% reported partial benefits.
Automobile Sector Leads in Benefit Pass-Through
The automobile sector has shown the highest compliance in passing on GST benefits. About 70% of vehicle buyers in the first week received full benefits, with another 20% receiving partial benefits. However, there was a slight decline in the second week, with a 24% drop in consumers receiving full or partial benefits and a 20% drop in those getting full benefits.
GST Rate Reduction and Sales Impact
The government lowered GST on around 80% of goods and services from September 22, cutting rates on many medicines and packaged foods from 18% or 12% to 5%, and on appliances, consumer electronics and automobiles from 28% to 18%.
The tax cut has significantly boosted sales during the Navratri festival (concluded October 1), with major brands reporting 25-100% growth compared to last year. Automobile companies such as Maruti Suzuki, Mahindra & Mahindra, Tata Motors and Hero MotoCorp led the sales surge.
Survey Insights and Recommendations
LocalCircles highlighted that the slower pass-through in packaged foods, medicines, and electronics indicates the need for closer government oversight. "The government will need to engage more proactively with FMCG and medicine brands to ensure that retailers pass GST reductions directly to consumers," the survey statement noted.
The survey underscores the importance of ensuring GST benefits reach end consumers promptly, especially in sectors where brand or distributor intervention affects pricing.
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