Consumers anticipated a direct benefit from the recent Goods and Services Tax (GST) reduction on services like salons, gyms, fitness centers, and yoga classes. Effective September 22, the GST rate was lowered from 18% to 5%. However, contrary to expectations, prices for these services have instead risen by 10 to 20 percent, leaving both customers and businesses bewildered, while
The Impact of Input Tax Credit (ITC) Withdrawal
The primary reason behind this unexpected price surge is the government's decision to withdraw the Input Tax Credit (ITC) facility for these services. ITC allows businesses to claim credit for the GST paid on their inputs, effectively reducing their overall tax burden. With ITC discontinued, businesses like salons and gyms are now compelled to bear the full GST on their operational expenses, including equipment, electricity, rent, and other inputs. This increase in operational costs has been passed on to the consumers.
Businesses' Predicament, Consumers' Burden
Owners of several large salon chains stated that they had to increase prices even before the new GST rates were implemented. They explained that without ITC, maintaining previous prices would lead to. Significant losses, forcing them to hike rates to cover their increased costs. Similarly, fitness centers, gyms, and yoga clubs are also transferring the burden of inflation to their customers, while this trend is particularly noticeable in the unorganized sector, where there is a lack of price monitoring.
Government Acknowledges Issue, Prepares for Action
According to an ET report, government officials have conceded that prices for some services are rising post-ITC withdrawal, and the full benefits aren't reaching consumers. They confirmed receiving numerous complaints and stated that action has been taken in some cases within the organized sector. However, controlling prices in the unorganized sector remains a significant challenge, while a senior official indicated that action would be taken against any service found to be charging excessive GST. It's challenging to track changes as many services lack fixed price limits.
Growing Beauty and Fitness Industry
Despite the price increases, the beauty and fitness sectors continue to experience solid demand. The industry is expanding rapidly in Tier-2 and Tier-3 cities,. Where consumers are increasingly willing to spend on health and appearance. Industry reports indicate a double-digit growth rate for this sector. In this dynamic environment, striking a balance between business viability and consumer affordability is. Crucial to ensure continued access to services without placing an undue financial burden on customers.
