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Eight Months of GST: How Prices Have Moved

This story first appeared in Livemint.

The goods and services tax (GST)—which subsumed multiple indirect taxes at the central and state levels—completes eight months on 1 March. How has it impacted consumers and the companies that service them? To answer this, we looked at prices of goods that make up an average middle-class shopping cart, at five points of time after GST, for the five main metros.

We sourced prices from India’s largest online grocer BigBasket’s website for 71 items, covering 18 categories of the consumer price index. GST was applicable on 47 of these items, and the total billed amount for this basket was around Rs7,000, of which GST was between Rs1,300 and Rs1,700 depending on the city.

What companies are paying as tax: Up

Other than in Kolkata, the amount companies paid as tax under GST for our basket is higher now than when the new indirect tax system was launched (see graph 1 below). This could be on account of companies facing higher costs. At the same time, prices paid by consumers have not increased by a similar degree—in fact, they have fallen in most cases. This suggests companies are facing higher costs, but are unable to pass it on; or that they are not passing it on to avoid being seen to be profiteering by the government.

Screen Shot 2018-02-28 at 11.26.48 AMWhat consumers are paying as prices: Down

Consumers, though, are paying less for this shopping basket. There are two prices of consequence here. The first is the maximum retail price (MRP), or the price listed on the packet.The second is the selling price (SP), which factors in discounts given by a retailer (here, BigBasket).

At the MRP level, the price of the overall shopping basket has increased in some instances, notably in Delhi, or has fallen marginally (graph 2). But at the SP level, the consumer is better off. Companies are unable to increase prices and retailers are extending greater discounts to keep customers (graph 3).

Screen Shot 2018-02-28 at 11.27.44 AM

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The Case For A Bigger Health Budget

India’s spend on healthcare is abysmally low. This year government is planning to spend more but it is still lower than what was sought last year and low in comparison with its global peers and other developed nations. The lower spending reflects on the poor access to healthcare for people who needs it the most.

 

11%

What is it? The percentage amount by which the Indian government is reportedly planning to increase its public health spending to $8.2 billion in the upcoming annual budget for 2018-19.

Why is it important? This is lower than the $10 billion health budget sought by health minister JP Nadda in a November letter to the finance minister, which would have amounted to a 33% increase in allocation over 2017-18. This raises questions if India would be able to meet its target of increasing its annual health spending to 2.5% of its GDP (gross domestic product) from the current 1.15%. Among 15 countries, India is the second last in terms of expenditure as a share of total government spending (5%) compared to China’s 10.4%.

Tell me more: According to the Global Burden of Disease report, 2015, India ranked a poor 154 out of 195 countries in terms of access of healthcare.

 

5,000 km

What is it? The range of Agni-V, an intercontinental surface-to-surface ballistic missile that India successfully tested on Thursday.

Why is it important? The latest test of this missile, which has been tested five times since 2012, may have been incremental from a technological perspective but it comes amidst India’s strained geopolitical relations with both China and Pakistan. India’s age-old dispute over the Himalayan region of Doklam with Beijing has flared up recently while Pakistan, whose relations with India seems to be worsening with increasing ceasefire violations across the Line of Control and the International Border in Jammu and Kashmir, is building up its nuclear capabilities.

Tell me more: Agni-V was test-fired on Thursday morning from Abdul Kalam Island, off the coast of Odisha, and covered a distance of 4,900 km in 19 minutes.

 

29

What is it? The number of items for which the GST (goods and services tax) Council, headed by finance minister Arun Jaitley, reduced the tax rate on Thursday, in addition to 53 categories of services, effective January 25.

Why is it important? Besides these rate changes, the GST Council also recommended a few policy changes, including modifications to e-way bill rules and late fee payable by registered people to furnish forms GSTR-1, GSTR-5, GSTR-5A and GSTR-6. Transporters will be required to carry an e-way bill when moving goods worth over Rs 50,000 between states, to check tax evasion, from February 1. Armed with details of goods over Rs 50,000, the government would be able to spot a mismatch if either the supplier or buyer does not file returns.

Tell me more: In its next meeting, the Council would consider bringing items such as crude oil, natural gas, petrol, diesel and real estate under GST.

 

20

What is it? The number of A380 ‘superjumbo’ aircraft that Emirates has placed an order for with Airbus, with an option to buy 16 more.

Why is it important? The latest order will bump up the A380 order book, which stood at 222 on December 31, 2017. Post this order, Emirates has ordered 178 A380s, which illustrates the importance of the Dubai-based carrier to the struggling A380 programme. Earlier this week, in an unusual statement, Airbus chief operating officer John Leahy said the France-based aircraft manufacturer would have to terminate the A380 programme unless Emirates ordered more aircraft.

Tell me more: The A380 aircraft is the most expensive plane in the Airbus portfolio, with a list price of $445.6 million. When Airbus introduced it in 2005, it expected to sell about 1,200 planes; it has so far delivered 222.

 

2

What is it? The number of awards that Indian batsman and skipper Virat Kohli won at the ICC awards for 2017.

Why is it important? Kohli was the men’s cricketer of the year and the ODI (one-day international) cricketer of the year. This haul underscores the phenomenal year that Kohli had: between September 21, 2016 and December 31, 2017, the qualification period for the awards, Kohli amassed 4,320 runs across the three formats.

Tell me more: Steve Smith was named the test cricketer of the year. Kohli was named the captain of both the test and ODI teams of the year, both of which featured three Indians each.

 

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More Cities Come Under Metro Rail Network

 

Amazon and Flipkart are outdoing each other, but last quarter was a downer for both the e-commerce giants. On GST, governemnt collected the lowest tax last month ever since the new tax regime was launched in July. A report said, more people are dying prematurely due to air pollution in India and this can get worse in coming decades. Delhi metro has done a ton of good in encouraging other cities to come under the metro rail network. And in cricket, Ashwin reached a milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

 

92

What is it? The respective scores of Flipkart and Amazon India in the July-September period, according to the latest RedSeer E-tailing Leadership Index.

Why is it important? Scores of both companies have declined from 95 in the previous quarter. Identical scores of India’s top two e-commerce firms in two consecutive quarters indicates intense competition with no clear winner. While RedSeer did not give any reason for the decline in their scores, the previous quarter saw the flagship festive sales of both Flipkart and Amazon, and the higher volume of orders could have affected customer satisfaction levels.

Tell me more: Flipkart has emerged as the most trusted brand in e-commerce in India, while Amazon tops in customer experience.

 

Rs 83,346 crore

What is it? Collections under GST (goods and services tax) for October up to Monday (November 27).

Why is it important? This is the lowest since July, the first month when GST was implemented in the country. The government attributed the lower tax collections to, among other reasons, lower tax incidence on most goods. In a report on Monday, India Ratings said the government’s disinvestment drive and encouraging GST collections would help “reduce pressure on fiscal arithmetic”. The government has used up 96.1% of its full-year fiscal deficit target in the first five months of 2017-18. It has set a fiscal deficit target of 3.2% of gross domestic product for the current fiscal.

Tell me more: The GST collections in July, August and September were Rs 92,283 crore, Rs 90,669 crore and Rs 92,150 crore respectively.

 

30%

What is it? The percentage of premature deaths in India caused by air pollution alone, according to a report by the Centre for Science and Environment (CSE).

Why is it important? It highlights the urgent need for a multi-pronged approach to lower air pollution levels across the country. The report says every third child in Delhi, which is among the world’s most polluted cities, has impaired lungs. Not only are Indian cities witnessing higher pollution levels but 41 tier-II cities exceed the ambient air quality standard. The Organisation for Economic Cooperation and Development has said air pollution could cause 6-9 million deaths by 2060, with the biggest increases in mortality rates in India and China, among others.

Tell me more: The CSE report also said 61% of all premature deaths in the country can be attributed to lifestyle or non-communicable diseases.

 

9

What is it?  The number of Indian cities that will have a metro rail service following the inauguration of the Hyderabad Metro on Tuesday. The other eight cities are Bengaluru, Chennai, Delhi, Gurugram, Jaipur, Kochi, Kolkata and Mumbai.

Why is it important? India has been late to embracing metro rail as a means of public transport, and it’s only in the last decade, following the success of the Delhi Metro, that cities have taken to it. Another two dozen projects are at various stages of completion or lined up with the ministry of urban development.

Tell me more: China has been extremely aggressive in making the metro rail a mainstay of its public transport system. In the global list of top 10 cities with the longest metro rail network, four are from China; Delhi is at number 11.

 

54

What is it?  The number of test matches that Indian off spinner Ravichandran Ashwin took to reach 300 test wickets. Ashwin reached this milestone on Monday, as India routed Sri Lanka in the second test at Nagpur.

Why is it important? Among the 30 bowlers who have scalped 300 test wickets, Ashwin is the quickest to this milestone in number of tests. He bettered the record of Australian fast bowler Dennis Lillee, of 56 matches.

Tell me more: Ashwin is the fifth Indian to reach 300 test wickets. Also, he is only the third blower to return at least 50 test wickets in three consecutive calendar years, the others being Shane Warne (1995-97) and Muttiah Muralitharan (2000-02).

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When the Earth isn’t enough 🌏

336,107

What is it? The number of H-1B visa applications filed by employers between October 2016 and June 2017.

Why is it important? The number of applications has not declined despite US President Donald Trump pledging to crackdown on misuse of H-1B visas, a temporary work permit. At this rate, the full year applications will exceed that of 2016 number of 399,349. However, approvals for current fiscal is sharply lower at 59% as compared to 87% in 2016. This could be because large number of petitions in current year are still pending decisions.

Tell me more: 74% of applications are filed for candidates born in India.

 

47.9

What is it? Nikkei’s Manufacturing Purchasing Managers’ Index (PMI) in July, a composite indicator of India’s manufacturing activity based on a survey by Markit, a financial information and services company.

Why is it important? This is the lowest since February 2009, the days of the global financial crisis. It slipped below the 50-point mark separating expansion from contraction for the first time this year. Uncertainty and information gaps around goods and services tax that was introduced on July 1st seems to have negatively impacted purchasing decisions.

Tell me more: New orders fell for the first time in the year-to-date and at the fastest pace since early 2009.

 

7

What is it? The number of months in which this year’s Earth Overshoot Day has arrived (August 2) this year, according to environmental groups WWF and Global Footprint Network.

Why is it important? Earth Overshoot Day is the date in which the annual demand of humanity on nature exceeds what the planet can regenerate over the year and it is the earliest so far. In other words, humanity is using up planetary resources such as soil, water and air at a faster pace than ever and will live on “credit” for the rest of the year; currently, we are using the resources of 1.7 Earths.

Tell me more: We would be able to return to living within the means of one Earth before 2050 if we moved the Earth Overshoot Day back by 4.5 days every year. Some of the ways in which individuals can help stop and later, reverse the trend is by burning less fuel, cut back on food waste and eating less meat.

 

22.4%

What is it? The percentage increase in car sales for Maruti Suzuki, which has more than 50% market share, in July this year.

Why is it important? Car sales has picked up after introduction of the goods and services tax (GST) from July 1st, after contracting by 11% in June. Other car makers, except Hyundai Motor, reported double-digit increase in sales growth.

Tell me more: Shipping of cars from factory gate to dealers is counted as a sale, so the increase could be because of manufacturers pushing the stock to dealers than end-customer demand.

 

61.5%

What is it? The increase in the net worth of Mukesh Ambani, chairman of Reliance Industries, in one year.

Why is it important? With a total net worth of $35.2 billion, he has raced ahead of Hong Kong-based Li Ka-Shing to become the second richest Asian after Alibaba’s founder, Jack Ma. Globally, Ambani went up to the 19th position, according to the Bloomberg Billionaires Index. This has been possible partly due to investors rallying behind Reliance Jio that has disrupted the telecom space in the last few months.

Tell me more: A report by Oxfam, which works to eliminate poverty, said India’s 57 billionaires have the same wealth as the bottom 70% of the population, pointing to rising income and wealth inequality in the Asia’s third largest economy.

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