Local levies, supply chain distortion trigger varying inflation

NEW DELHI: Even after five years of a common Goods and Services Tax (GST), retail inflation in India varies widely across states as differences in local levies and supply chain efficacy distort consumer prices.

The Consumer Price Index (CPI)based inflation rate for the month of June was as high as 10.5 per cent in Telangana and as low as 4.7 per cent in Bihar, while the national average stood at 7 per cent. The difference in inflation, according to experts, can be attributed to factors like transport costs, tax policies of state governments, and supply chain efficiency.

As per the latest CPI data, states, including Andhra Pradesh and Haryana, registered inflation of over 8 per cent. The other states which recorded inflation higher than the national average were Assam, Gujarat, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, and West Bengal. The Union Territory of Jammu and Kashmir too had inflation of 7.2 per cent.

On the other hand, inflation was lower than the national average in Uttarakhand, Uttar Pradesh, Punjab, Karnataka, Jharkhand, and Chhattisgarh in June. Tamil Nadu, Delhi, Himachal Pradesh, and Kerala reported retail inflation of less than 6 per cent.

Rajinder Singh, General Secretary of All India Confederation of Goods Vehicle Owners’ Association said that 40-60 per cent of the transportation cost is on account diesel which directly impacts the prices of consumer goods. Singh said that for transporting perishables like vegetables, vehicle owners charge a to-andfro fare. For long-distance transportation, only one-way rates are charged.

“Toll is another important factor in determining the transportation cost. More the number of toll plazas on a route, higher the cost of deliveries,” Singh added. Diesel costs more in states like Andhra Pradesh, Telangana, Rajasthan, Madhya Pradesh and Maharashtra because of the higher incidence of local taxes.

S P Sharma, Chief Economist at industry body PHDCCI, said that inter-state variation in inflation is mostly a phenomenon of different economic dynamics and policy environment attributes of states.

Rural inflation varies more across states and it is also generally higher than its urban counterparts in almost all states.

GST on essential items after states sought levy, aimed to check evasion, says official

GST on pre-packaged goods/ food packets was levied after some states gave feedback of losing revenues they previously earned from levy of VAT on food items, a top government official said. The decision to levy the tax, which came into effect from July 18, is not that of the Union government but of the GST Council. It was considered by the Fitment Committee that has officers of some

states and the centre. It was also recommended by a group of ministers (GOM) consisting of minister representatives of some states and finally by the GST council, Revenue Secretary Tarun Bajaj told PTI here. In all, the GST Council, the new constitutional mechanism in the country for taking decisions on GST, took a consensus view on levy of the tax, he said. The panel, which is headed by the Union Finance Minister and comprises representatives of all states and union territories, takes decisions when everyone is onboard, he said.