GST cuts passed on, spurred consumption, may show in GDP: Govt
A sharp jump in sales, especially of electronics and consumer goods; reduced prices for key daily-use items; all adding up to a significant push to consumption which may even reflect in the GDP numbers for financial year 2025-26 — these were some of the key gains, highlighted by the government Saturday, attributed to GST 2.0 reforms rolled out September 22.
At a joint conference named “GST Bachat Utsav,” held by Finance Minister Nirmala Sitharaman, Commerce and Industry Minister Piyush Goyal, and Information & Broadcasting Minister Ashwini Vaishnaw, the government’s message was that the benefits of GST rate cuts are reaching the end-consumers and these cuts have resulted in consumers increasing their purchases, which in turn, is going to be a driving force for investment.
Sitharaman said the tax reduction isn’t limited to this season and the consumption story will continue. When asked whether the rise in consumption is due to pent-up demand or revenge purchases, she said: “It is important for us to understand that these tax reductions are required from the point of view of making the system a lot more nimble. Better collections mean you have greater fiscal room to give back something. So, now that the collections have improved…and we are touching close to Rs 2 lakh crore gross collections per month, there is a reason for us to cut the rate also and pass on the benefit to the consumers,” she said.
The Finance Minister said that the central GST (Goods and Services Tax) formations across the country are monitoring prices of 54 daily-use items since the GST 2.0 rollout on September 22 and the tax benefit has been passed for all items except some varieties of cement.
“…54 items are being closely monitored. Not in one has the tax benefit not been passed, not even in one item…there are, of course, one or two items like high-end cement, the Portland variety, on which there is an expected rate of passing on should happen, but it is less than that rate. It’s called PPC or Portland Pozzolana Cement, probably that one category which is far lesser than what should have been expected to be passed on…except for Portland variety of cement of 1 or 2 brands, all cement companies have reduced (prices), so are milk and milk-related items,” she said.
“So on these 54 particular items for which we have been getting inputs from the zones, we are convinced that on every such item the benefits are being passed on,” she added.
Under the next-generation GST reforms, multiple slabs — 5 per cent, 12 per cent, 18 per cent and 28 per cent — were replaced with a broad two-slab structure: a merit rate of 5 per cent and a standard rate of 18 per cent, in addition to a special demerit rate of 40 per cent for sin and demerit goods.
The reforms were announced by Prime Minister Narendra Modi in his Independence Day speech, following which the GST Council, having representatives from the states and Centre, met in the capital on September 3 to give its nod to GST 2.0 that became effective September 22.
