GST rejig may ease retail inflation by up to 75 bps: SBI Research
The GST rationalisation has steadily reduced the effective weighted average rate, from 14.4% at inception to 11.6% in September 2019.
The GST rationalisation has steadily reduced the effective weighted average rate, from 14.4% at inception to 11.6% in September 2019.
The GST rationalisation has steadily reduced the effective weighted average rate, from 14.4% at inception to 11.6% in September 2019.
The recent GST rate rejig, which lowers tax rates on essential household items and services, could ease retail inflation by 65–75 basis points in the next fiscal, SBI Research said Thursday. The 56th GST Council meeting on Wednesday simplified the four-tier structure into a citizen-friendly ‘Simple Tax’ with two main slabs, 18% standard and 5% merit rate, plus a 40% de-merit rate for select goods and services.
The new rates take effect September 22, except for tobacco products, whose revised rates will be notified later. Of 453 goods impacted, rates fell for 413, while only 40 saw an increase. Nearly 295 items now attract 5% or nil GST instead of 12%, the report noted.
SBI Research estimated that this drop in GST on essentials could trim CPI inflation by 25–30 bps in FY26, assuming a 60% pass-through on food. Lower service rates could cut another 40–45 bps, yielding an overall moderation of 65–75 bps in FY26–27.
The GST rationalisation has steadily reduced the effective weighted average rate, from 14.4% at inception to 11.6% in September 2019. With this latest rejig, SBI projects it could decline further to around 9.5%.
(With PTI inputs)