GST reform: 10% of India's retail basket to see relief
What's the story
A recent analysis by Moneycontrol has revealed that nearly 10% of India's consumption basket could get direct relief from the proposed Goods and Services Tax (GST) rationalization in October. The move is part of Prime Minister Narendra Modi's promise made during his Independence Day speech. He had hinted at upcoming GST reforms, calling them a "gift for you this Diwali."
Tax relief
PM Modi hints at next-gen GST reforms
In his Independence Day address from the Red Fort, PM Modi had hinted at the next generation of GST reforms. "We are coming with the next generation of GST reforms, this will be a gift for you this Diwali. Taxes needed by the common man will be reduced substantially," he said. The Prime Minister also promised an increase in facilities and cheaper everyday items to give a new boost to the economy.
Price reduction
Proposed GST rationalization could mean significant price cuts
The proposed GST rationalization involves removing the 12% and 28% slabs, bringing most items into lower brackets of 5% and 18%, respectively. This could mean a significant price cut for everyday consumables like butter, ghee, noodles, and clothes which currently attract a 12% duty. Even durables such as air-conditioners and televisions are likely to become cheaper under this reform.
Inflation impact
Price pressures remain high in several categories
Despite the proposed GST cuts, price pressures remain high in several categories. For instance, butter inflation hit a 16-month high of 5.7% in July as compared to 4.8% in June. Noodles, which also attract a 12% GST rate, saw an inflation rate of 4.6% in July. These numbers highlight the continuing challenges of managing inflation across different sectors even with potential tax reforms like the proposed GST rationalization.