GST Rate Rationalisation: A Balanced Move

In a substantial policy shift, the GST Council has opted to streamline tax slabs, moving from four to two main rates at 5% and 18%. A Crisil report, while acknowledging an annualised short-term net loss of Rs 48,000 crore due to these changes, downplays concerns of any substantial fiscal pressure on the government.

The previous fiscal year saw GST collections total Rs 10.6 lakh crore. Given this backdrop, Crisil asserts that the projected shortfall from GST rationalisation is not significantly impactful. The majority of revenue has historically come from the 18% slab, with much less garnered from the 12% and 28% slabs.

The streamlined GST structure is expected to bring more goods and services into the formal economy, enhancing tax buoyancy over time. With the inclusion of new services such as e-commerce delivery at the 18% rate, tax collections could see a rise, particularly if producers pass on tax benefits to consumers, thus influencing consumer spending patterns.

(With inputs from agencies.)