GST -cutbacks can increase consumption, support domestic production: Amnish Aggarwal

Let’s start with the consumption front. Which categories do you think the most to win the most when GST is reduced on items such as ACS, refrigerators or ghee, and how useful could this be for the consumption question?

Amnish Aggarwal: It depends on how the government merges the different GST plates. We currently have records of 5%, 12%, 18%and 28%, plus compensation on luxury goods. Many items currently at 12% are likely to go to 5%, including items for daily use and processed foods. Items with 18% can also see some reduction, although moving them directly to 5% can be because of the considerations of income.

For sustainableities such as ACs and refrigerators, which are currently 28%, the rate can fall to 18%, but items that are already at 18%may not see much change. In general, the government wants to reduce the burden for the ordinary man, so it is expected that daily articles and smaller goods will benefit consumers the most.

How much of this advantage do you expect companies to pass on to consumers versus retain for margins? Which sectors can use it as a profitability pillow?

Amnish Aggarwal: Historically, companies must pass on tax benefits to consumers within a defined time frame. There is very little chance that they will keep these benefits without passing them on. Over time, companies can beat higher volumes or adjust prices if inflation rises, but the initial cuts or GST reductions will largely benefit consumers.

The purpose of this exercise is to stimulate the question. How much can this supporting demand for ambitious goods such as sustainable goods and clothing?

Amnish Aggarwal: The impact depends on the degree of tax reduction. For example, a reduction of 12% to 5% can translate into a real price change of approximately 3-3.5%. However, the greater effect is on consumer sentiment. Tax reductions can have a more meaningful impact for sustainable and somewhat expensive items.

The aim is to support domestic consumption and production, to bring more people to the organized market, to encourage general consumption and to benefit larger brands and companies. Although price changes may not be drastic, an improved sentiment and a rationalized tax structure can stimulate a significant demand.