Consumer product prices drop after zero VAT

Retail prices on certain goods have dropped by about 5 per cent since the recent implementation of zero VAT on a range of consumer items, the relevant government department said on Thursday. According to the Consumer Protection Service (ministry of commerce), the change has been observed since October 12, when zero VAT was applied to five categories of consumer goods: bread, milk, coffee, sugar and baby foods. The zero VAT – part of a government relief package addressing the cost of living – will remain in force up to May 31 of 2027. The Consumer Protection Service said that following samples taken from large supermarkets as well as the e-kalathi platform, they found that retail prices for the affected items fell by 5 per cent. The samples were taken from selected products from each of the five categories. The service said their findings are only a snapshot of the market, adding that having zero VAT does not guarantee prices will remain unchanged or won’t rise in the coming months – as they are affected by factors such as production and supply costs, the cost of raw materials, transport costs and the state of competition in the market. The service would continue monitoring the retail market.