Retail prices of most items of common consumption are unlikely to rise after states implement the value added tax regime, a study conducted by the Karnataka state administration has said.
The study, which has taken into account the prices of most items of common consumption, has concluded that retail prices will be neutral on a basket of commodities after states change over from the existing sales tax/commercial tax regime to the VAT scheme.
The tax-neutrality will be largely because of the removal of cascading on account of input tax rebating, state government officials said.
The study, which is based on actual value addition by a cross-section of dealers -- input producers, manufacturers, wholesalers and retailers -- can be applied to nearly all states. This allays fears that commodity prices will rise after the imposition of the new tax regime.
The study says that prices of commodities like edible oil, readymade garments, toilet articles and confectionery and biscuits are likely to drop after VAT.
Under the new regime, edible oil is projected to cost Rs 34.8 per litre in Karnataka, down from the current Rs 35. A single unit of toiletry will cost Rs 23.45, down from the current price of Rs 25.
Moreover, a readymade garment piece will cost Rs 3.55 less. Confectionery and biscuits will also cost less.
However, price of wheat flour will remain unchanged at Rs 15 per kg and sugar at Rs 13 per kg. Prices of pulses, textiles and coffee powder are expected to increase marginally under the VAT regime.
