View: GST cuts don't always cut prices

Arvind P Datar The writer is a senior advocate.

G Natarajan G Natarajan is an advocate

In September, GST rates were reduced on many commodities. The anti-profiteering rule in Section 171 mandates that any reduction in the rate of tax should be passed on to consumers by 'commensurate reduction in prices'. But this is not always the case as, paradoxically, reduced tax does not necessarily result in reduced prices .

When GST on a final product - say, an air conditioner - falls, the buyer should get a lower price. The difficulty arises when the tax is reduced on inputs used in the manufacture of dutiable final products. For example, GST was reduced from 28% to 18% on cement, but it has a complex taxation structure. Accounting standards require that taxes paid on inputs do not form par