How will Goods and Services Tax reforms impact the Indian economy?
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Nirmala Sitharaman announcing GST reforms. Photograph: (ANI file)
Goods and Services Tax reforms take effect today: Finance Minister Nirmala Sitharaman has said that the reform will provide Rs 2 lakh crore into the hands of consumers.
The Goods and Services Tax (GST) reforms took effect today, potentially making items like cars, milk, ghee, medicines, and several daily-use items cheaper. The central government has eliminated the 12 percent and 28 percent GST slabs and placed itemsin these categoriesinto 5 percent and 18 percent slabs, effectively handingmore disposable income to the masses to boost domestic consumption. The center has also vowed to ensure that the GST benefit is passed on to consumers.
Finance Minister Nirmala Sitharaman has said that the reform will provide Rs 2 lakh crore into the hands of consumers. With increased disposable money, the government expects that it will create demand and consumer spending, advancing the economy.
Here's howthe reforms impact the masses
Daily bills to get smaller
Daily-use items like kitchen and grocery items will get cheaper. Amul and Mother Dairy have already reduced the prices of several items. Amul has cut prices across 700 products, including ghee. Mother Dairy, one of the biggest milk brands in the country, has reduced the prices of milk by Rs 2 per liter. Patanjali has slashed the prices of Nutrela Soya Chunks by Rs 20 per kilo. Many other items will also attract lesser GST, including medicines and life-saving drugs. Health and life insurance premiums will also attract zero GST, which is expected to be passed on to the customers.
Garments and footwear under Rs 1000 will also attract lesser taxes. Home appliances like refrigerators, washing machines, and televisions have also been moved from 28 per cent to 18 per cent tax slabs.
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Small cars will also get cheaper. Maruti Suzuki, Tata Motors, Hyundai, etc, have announced massive price cuts. SUVs will also get cheaper because the taxes on them have been lowered to a 40 percent flat GST.
Economic Boost
The government has implemented GST reforms during the festive season. In states like UP, Bihar, Rajasthan, Gujarat, and Madhya Pradesh, people tend to spend more because of festivals like Diwali, Dussehra, and Navratri. With more money in their hands, the move is expected to provide a fillip to the economy, which is reeling under geopolitical tensions and Donald Trump's tariffs on Indian exports.
Here's how GST will impact several sectors
Grant Thornton Bharat told the Economic Times that the prices of FMCG products will come down by 8-10 per cent.
CRISIL said that the GST cuts will directly benefit 11 of the top 30 consumption items. It said milk, medicines, two-wheelers, televisions, and processed foods also carry lower taxes.
The ratings agency says that the move will gradually lift demand, especially for middle-class households. The agency also said that it sees a price cut of 8–9 per cent in entry-level cars, 7–8 per cent in standard two-wheelers, and 6-7 per cent in premium SUVs.
"If producers pass on the benefits swiftly, it will ease inflationary pressures and provide a durable push to consumption,” the agency told ET.