GST Reform 2.0 Signals Economic Boost Through Simplified Tax Structure

The GST Council's recent overhaul aims to streamline India's indirect tax regime by simplifying the tax structure from four slabs to two. Essentials are now taxed at 5%, while other goods are at 18%, with luxury items facing a 40% levy. These changes, effective September 22, aim to spur demand and compliance.

The reform's anticipated impact on GDP growth and inflation stem from combined policies, including prior income tax cuts and monetary accommodation. Industry leaders and financial analysts project a modest rise in GDP, potentially gaining 0.1-0.2 percentage points, alongside a significant impact on inflation rates.

The revamped tax framework is expected to benefit several sectors, particularly consumer staples, retail, and automotive industries. The simplification attempts to curtail compliance burdens, boosting disposable income among consumers, which in turn, should mitigate sluggish private sector capital expenditure.

(With inputs from agencies.)