Low GST but expensive cheques! Fitness and beauty services get costlier—Here’s why gyms and salons are raising prices
The GST on personal grooming, fitness, and wellness services came down from 18% to 5% on September 22, but rather than seeing lower prices, customers across the country are facing 10%-20% hikes at salons, gyms, yoga studios, and fitness centres.The price hike comes as businesses are now forced to bear the full cost of taxes on expenses like equipment, utilities, and rent due to the withdrawal of the input tax credit (ITC).“Many salons, including ours, increased prices of services just before the rollout of the new GST rates. We try to balance affordability with profitability, but without ITC benefits, we would be at a loss if we continued to charge consumers at pre-GST prices,” founder of a nationwide salon chain told ET, on the condition of anonymity.What is ITC?Input tax credit (ITC) lets businesses get back the taxes they have already paid on things like raw materials and services they use. This helps lower their overall tax bill. Industry experts say that for salons, without ITC, the benefit of the lower GST is lost. Widespread impactOther services that can’t claim ITC, like catering and taxi leasing, have also slightly raised their prices, especially in the unorganised sector.Sectors beyond salons are also affected. Catering services, taxi leasing, and even insurance companies, especially in the organised segment, have shown reluctance to lower prices. “The beauty industry had been requesting a reduction of GST on grooming services for quite some time from the government,” Sandeep Ahuja, former managing director at VLCC Health Care and now an independent consultant, told ET.The expert further added that even though the reduction is significant, the withdrawal of ITC makes it a “zero-sum game.”“More so for the beauty industry, where appliances and other gadgets salons use don’t have a very long shelf life and need to be replenished frequently. All these are recurring costs,” Ahuja added.Following the removal of ITC, salon chains in Delhi-NCR have adjusted their pricing across all outlets, executives confirmed.Officials in the finance ministry acknowledged the situation. “If we receive a complaint where higher GST on services is charged we will act on it,” said a senior official, speaking anonymously. However, monitoring prices in the unorganised sector remains a challenge, as these services do not have fixed maximum retail prices, the financial daily reported.Meanwhile, both the beauty and fitness segments continue to report strong growth. Chains are expanding rapidly into tier-2 and tier-3 cities, lifted by rising consumer aspirations and demand, according to industry reports.
