Do reduced GST rate cuts really translate into savings for customers?
GST Rate Cuts: The Goods and Services Tax (GST) rate was reduced from 18% to 5% on September 22nd, leading people to expect that services like salons, gyms, fitness centers, and yoga classes would become cheaper. However, instead of decreasing, prices at these places have increased by 10 to 20 percent. This situation has surprised both customers and businesses.
This has led to higher prices for services like salons, gyms, and fitness centers, impacting the budgets of ordinary people.
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This raises the question of how customers will receive relief from the reduced GST.
Even the reduced GST rate isn't paying off
This is because the government has discontinued the option of input tax credit (ITC) on these services. Input tax credit is a method through which businesses can reclaim a portion of the tax already paid on their expenses. But when this facility was discontinued, businesses like salons, gyms, and fitness centers had to pay the entire GST on their equipment, electricity, rent, etc. This increased their costs, forcing them to pass the cost on to customers.
Compulsion for Businesses, Problems for Customers
Owners of several large salon chains reported that they had increased prices even before the new GST rate came into effect. They say they want to maintain a balance between customer convenience and their own profits, but the lack of ITC has made their situation difficult. If they continued to provide services at the old rates, they would have incurred losses. Therefore, they were forced to increase prices.
Similarly, fitness centers, gyms, yoga clubs, and other service sectors are passing on the burden of inflation to their customers. This impact is more visible in the unorganized sector, where price monitoring is also lacking.
Beauty and Fitness Industry Growing Business
Although prices have risen, demand in the beauty and fitness sector continues to grow. The industry is expanding in Tier-2 and Tier-3 cities, where people are willing to spend more on their health and looks. According to industry reports, the sector is growing at a double-digit rate. Amid this growth, it's crucial for both businesses and consumers to maintain a balance between providing services and not overwhelming customers.
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