JUST days before the hike in the goods and services tax (GST), a slew of businesses have announced they will absorb the increase for up to six months.

More than half of 150 shops and restaurants in Velocity@Novena Square, and over 40 restaurants in Little India, made this commitment yesterday.

They did so during a visit to these places by Minister of State for Trade and Industry Lee Yi Shyan, who chairs the Committee Against Profiteering (CAP).

It was his fourth walkabout in a month for the committee. He was accompanied by Minister of State for Education Lui Tuck Yew, whose Moulmein ward in Tanjong Pagar GRC includes these areas.

Mr Lee and Rear-Admiral (NS) Lui spoke to more than a dozen shopkeepers and restaurateurs, to assess whether businesses would absorb the two percentage point increase, from 5 to 7 per cent, from Sunday, and to urge them against using the hike to profiteer.

'We want stall holders and merchants to be responsible,' said Mr Lee. 'When they adjust the price to reflect the GST increase, they should just do so for that magnitude rather than overpricing the items and profiteering from the exercise.'

Ms Claire Cher, a senior manager of Velocity, said half of the shops in the mall will absorb the hike for up to six months, while a few major retailers, such as sports goods store Fila and men clothes shop Celio, will do so 'indefinitely'.

'These businesses have strong brand names, and their products are much hankered after. So they can absorb the new tax without much of a dent to their profits,' she added.

Many restaurants in Little India, however, will not impose the new rate for a different reason: They fear price increases will lead to fewer customers.

Mr G. Shanmugam, president of the Indian Restaurant Association of Singapore, said rent and the price of raw materials, such as milk and oil products, had risen in the last year.

The timing of the GST hike, he said, is 'not right' for restaurateurs.

Still, half of the 89 restaurants that belong to his association will absorb the GST hike to remain competitive. 'No one wants to overprice the food because they will be the losers,' he said.

A few other leaders of groups in the retail and restaurant sectors, who were present yesterday, appealed to their members to absorb the GST hike.

Mr Jerry Lim, executive director of the Restaurant Association of Singapore, urged the 400 restaurants which are its members to absorb the increase for 'at least three months' to give consumers time to adjust to it.

Mr Chong Wee Cheong, chief executive of Prime supermarket chain, said all 18 stores of his grocery chain will not pass on the increase for six months.

'We are doing it to thank our customers for their support,' he added.

Four other supermarket chains - FairPrice, Shop N Save, Cold Storage and Sheng Siong - had earlier made similar commitments to absorb the GST hike for up to six months.

Mr Lee was cheered by these developments.

'The shops and restaurants we've visited - some of them are saying their prices will be the same with the Great Singapore Sale going on, and after that they plan to maintain the same prices because they realise this is a very competitive industry.

'The others will reflect the change in the GST but they will do so with 2 per cent or less... I think these are encouraging signs,' he said.