New Delhi, Aug 28
The government’s plan to simplify the Goods and Services Tax (GST) structure, replacing the existing four-slab GST system with a simpler two-slab structure, is set to bring considerable relief to the consumers, with lower tax rates expected to make a wide range of goods more affordable, according to a new report.
This move will directly benefit 11.4 per cent of India’s Private Final Consumption Expenditure (PFCE), with taxable consumption estimated at Rs 150-160 lakh crore, Bank of Baroda (BoB) said in its analysis.
The government would bring the 12 per cent slab to 5 per cent and the 28 per cent slab to 18 per cent, and it will bring effective GST rate on goods and services to ease to 14-15 per cent.
This is expected to have a knock-on effect in the form of cheaper final goods and services, helping contain inflation.
The report estimates that 8.5 per cent of the overall CPI basket will be impacted, while both core and wholesale inflation are likely to moderate as intermediate costs fall.
According to the public sector bank, together, the two moves are expected to spur demand for auto loans, personal loans and credit cards, with non-banking finance companies also set to benefit from rising festive season demand.
GST rationalisation as a major consumption booster at a time when global trade tensions and high tariffs from the United States pose challenges for India’s economy, the bank stated.