Rate Cut Optics

Another round of Goods and Services Tax (GST) rate cuts have been effected by the governing body GST Council, which met recently in Delhi for the 28th time. The rates of around 88 goods have been reduced. With this rate cut, the government has finally yielded to a long-standing demand to reduce the taxes on sanitary napkins from 12 per cent to nil.

On the face of it, the move looks like a great step leading to sharp price cuts and promoting menstrual hygiene. There is, however, a catch. Under GST, if any goods and services are exempted, the manufacturer and service providers lose the right to claim credit on the tax paid on inputs. The input tax thus becomes a cost for the manufacturer, which will then obviously be passed on to consumers thus negating the impact of rate cut. This is true for all sectors including - health, education, petroleum - that have been exempted from GST.

Dipak Mondal