New Delhi, Sep 4
The sweeping changes in Goods and Services Tax (GST) rates announced by the government may have only a minor impact on public finances, with the fiscal burden on the Centre expected to be just Rs 18,000 crore, according to a report by global brokerage Bernstein on Thursday.
From daily-use FMCG items to cars, white goods, and insurance, most products are set to become cheaper from September 22.
Revenues redirected from the compensation cess into the new 40 per cent GST bracket could fund nearly Rs 4.5 lakh crore ($5.2 billion) of that loss, leaving a net shortfall of about Rs 4.8 lakh crore ($5.6 billion), or 0.16 per cent of GDP.
Both reports suggest that while GST reforms will lead to some revenue loss for the government, the long-term benefits of higher consumption and stronger compliance will outweigh the short-term fiscal hit.