Government Questions E-Commerce Companies on Price Hikes Despite GST Reductions

The Finance Ministry, along with the Central Board of Indirect Taxes and Customs (CBIC), has launched a crackdown on e-commerce platforms that have allegedly failed to pass on the benefits of recent GST rate cuts, sources told CNBC-TV18.

The action follows a series of customer grievances that some online players hiked prices even after the GST cut on certain items became effective on September 22. Authorities informed that the ministry and CBIC are keeping a close watch on online prices to ensure that savings under the new tax regime are correctly brought down.

"Complaints have been received, platforms have been warned and are still under tight observation," a source has confirmed. The government has stressed that profiteering at consumers' cost will not be allowed. Both offline stores and online platforms are being watched to ensure that tax relief reaches the buyers.

The monitoring includes day-to-day use fast-moving consumer goods (FMCG) and essential goods, such as shampoo, toothpaste, pulses, and packaged food items.

Authorities have further said that some e-commerce players have been orally warned regarding prices that were not being reduced sufficiently. When asked, some platforms mentioned "publicity glitches" as the cause of inconsistencies. "Government is keeping a strict vigil," one source said.

The revision of the GST rate that came into effect from September 22 reduced the earlier four-slabs of taxation of 5%, 12%, 18%, and 28% to a two-slabs of 5% and 18%. This is likely to reduce prices of around 99% of items of common consumption.

Though the formal anti-profiteering mechanism has not yet been triggered under the new tax regime, the government is banked on its own monitoring and market intelligence to monitor compliance. Industry sources further added that numerous companies have made voluntary price reductions to account for the GST reductions.

Previously, on September 9, the Finance Ministry had instructed Central GST field officers to file comparative reports monthly about price variations in 54 widely used products such as butter, shampoo, toothpaste, tomato ketchup, jams, ice cream, air conditioners, televisions, diagnostic kits, glucometers, bandages, thermometers, erasers, crayons, and cement.

The initial comparative report of Maximum Retail Prices (MRPs) of these products, brand-wise, is to be filed with the CBIC by September 30.

With this heightened price examination, the government is making sure that compliance with the new tax system is obligatory. Monitoring both physical retail channels and online e-commerce websites, authorities want to make sure that the benefit of the GST rationalization goes to consumers, not businesses.

In the face of grievances over insufficient price cuts on certain online sites, the government has already sent unofficial notices to some operators regarding the price of certain products, according to sources.