New Delhi, Sep 5
The Goods and Services Tax (GST) overhaul, which comes into effect from September 22, is a significant shift aimed at stimulating growth through consumption-led strategies, especially as indirect taxes are regressive in nature, a report said on Friday.
"The loss to the exchequer is estimated at 0.14 per cent of GDP, with states possibly taking a larger hit. However, with the compensation cess ceasing to exist (nearly 0.5 per cent of GDP), there is a de facto demand boost for the economy, even as that revenue was not allowed to be used for fiscal budgetary flows," Emkay said in a report.
According to Emkay, this strengthens the longstanding sectoral rotation theme of ‘consumption over capex’.
The GST rationalisation, which was approved by the GST Council, will lead to a shift toward a dual-slab structure from September 22. The 5 per cent and 18 per cent GST slab, replacing the current 4-tier structure, along with a 40 per cent slab for luxury and sin goods (mostly intoxicants).