Prices drop after VAT reduction comes into effect

A reduction of 1 percentage point in China's value-added tax (VAT) announced last month became effective on Tuesday, and the prices of many products have already dropped to reflect the change.

As the VAT rate for retail gasoline and diesel has been lowered from 17 percent to 16 percent, the ceiling retail prices for gasoline and diesel came down by 75 yuan ($11.84) and 65 yuan per ton, respectively, according to a statement published on the website of the National Development and Reform Commission on Sunday.

Products in the Chinese Apple Store also saw a drop in prices starting on Monday, according to domestic tech news site 36kr.com. The price of Apple's flagship iPhone X has dropped from 8,388 yuan to 8,316 yuan, 36kr.com noted. And all other Apple products have had their prices cut by 0.85 to 0.9 percent.

Automotive companies have also been quick at reflecting the tax rate changes. Mercedes-Benz announced in a statement sent to the Global Times on Tuesday that they have reduced the suggested retail prices for their vehicles, with price cuts of about 1,000 to 2,000 yuan ($158 to $316) for Smart brand cars. And its Mercedes AMG models could see price cuts of as much as 32,000 yuan.

The VAT adjustment lowers the general tax rate applied to manufacturing and related industries from 17 percent to 16 percent, according to a post on the website of the Ministry of Finance, citing a cabinet meeting. The rate applicable to agriculture, transport and telecommunications has been lowered from 11 percent to 10 percent, the post noted. The tax cut is expected to save businesses and consumers around 240 billion yuan ($37.8 billion) this year. The tax rate change was made official by a notice from the State Administration of Taxation on April 4.

The tax rate adjustment follows a government report by Chinese Premier Li Keqiang in March promising to lighten the tax burden for businesses and consumers in China, with a focus on the manufacturing and transport industries. The government has planned to implement 800 billion yuan ($126 billion) in tax reductions this year.