From September 22, the Goods and Services Tax (GST) rate was reduced from 18% to 5%, due to which common people thought that services like salons, gyms, fitness centers and yoga classes would now become cheaper. But even after this, instead of decreasing, the prices at these places increased by 10 to 20 percent. Both customers and businessmen are surprised to see this situation.
Actually this happened because the government has closed the option of Input Tax Credit (ITC) on these services. Input tax credit is a way by which businesses can reclaim some of the tax already paid on their expenses. But when this facility was closed, businesses like salons, gyms and fitness centers had to pay full GST on their equipment, electricity, rent etc. themselves. This increased their costs and they were forced to pass the cost on to the customer.
Compulsion of businessmen, problems of customers
Owners of many big salon chains said that they had increased the prices even before the new GST rate was implemented. They say that they want to maintain a balance between customer convenience and their own profit, but the lack of ITC has made their situation difficult. If they continued to provide services at the old prices, they would have to suffer losses. Therefore, they were forced to increase the prices.
Similarly, fitness centres, gyms, yoga clubs and other service sectors are passing the burden of inflation on their customers. The effect of this is more visible in the unorganized sector, where there is also a lack of price monitoring.
Government also acknowledged the problem, prepared to take action
According to the ET report, government officials have admitted that after the removal of ITC, prices on some services are increasing and its full benefits are not reaching the customers. He also said that many complaints have been received and action has also been taken in some cases in the organized sector. However, price control in the unorganized sector is challenging.
A senior official said that if any service charges more GST then action will be taken against it. But there is no fixed price limit for many services, so it becomes difficult to track changes.
Growing business of beauty and fitness industry
Although the prices have increased, the demand in the beauty and fitness sector is continuously increasing. This industry is expanding in tier-2 and tier-3 cities, where people are ready to spend more on their health and looks. According to industry reports, this sector is growing at a double-digit growth rate. Amidst this boom, it is important to maintain a balance for both businesses and customers, so that services remain available and customers are not burdened heavily.