Despite GST-cut, why are detergents like Surf, Vim still costly?

Earlier in November, the GST Council cut tax rates of more than 200 items in an attempt to make common-use items more affordable for the people.

The list of pruned items included detergents and dish-washing soap, among others.

However, you might have noticed many manufacturers haven’t reduced prices yet, including Hindustan Unilever Ltd. (HUL), India’s biggest consumer goods company.

Bloomberg explains the reason.

Despite GST-cut, why are detergents like Surf, Vim still costly?

TradersTraders are caught in a quandary with loads of stocks

The GST Council’s decision to cut tax rates on these items from 28% to 18% came on November 10, and it was to go into effect five days later.

However, many sellers had already procured stocks from HUL, and affixing stickers on the printed MRP would be next to impossible, logistically.

Moreover, traders had already paid higher prices on these before November 15.

Meanwhile, HUL raised base prices to keep MRP unchanged

HULMeanwhile, HUL raised base prices to keep MRP unchanged

Meanwhile, HUL increased its base prices, keeping retail prices unchanged (base price of a 300gm Vim Bar increased by 15% to Rs. 17.26, keeping MRP constant at Rs. 22).

Upon enquiry, HUL said it had asked retailers to pass benefits on to consumers.

However, most small-time traders denied receiving such instructions. On the other hand, hypermarkets like Big Bazaar and Reliance Smart offered discounts.

EateriesRestaurants in India had also adopted similar measures

There were similar complaints against restaurants, including international chains like McDonald’s, Starbucks and Domino’s.

After a cut in GST from 18% to 5%, many increased their prices instead, keeping expenses for the customer the same as before.

It’s not just the global franchises. At least one sweet shop in Delhi increased the price of its Veg Grill from Rs. 70 to Rs. 77.

So will you even get benefits of the GST cut?

It might take some time for benefits of GST cut to reach consumers. Sunil Alagh, SKA Advisors chairman, says it will be weeks before fresh stock reaches markets, which will have lower prices. There’s also the possibility that companies increase grammage rather than reduce prices.