GST Reforms May Boost GDP by 10 to 60 bps: Economists

The GST rate cuts could boost the GDP growth by 10-60 basis points (bps) on an annualised basis due to higher consumption, widening of compliance and lower inflation, experts said.

- FE BUREAU

The GST Council on Wednesday approved a major restructuring of the indirect tax regime by pruning the number of main slabs to two—5% and 18%—and introducing a special 40% rate for sin goods.

The GST overhaul, effective September 22, is a significant shift aimed at stimulating growth through consumption-led strategies, especially as indirect taxes are regressive in nature, said Madhavi Arora, chief economist, Emkay Global Financial Services.

"Ceteris paribus, such tax changes would add ~0.6% of GDP to domestic demand on an annualised basis and should boost (mass) consumption in FMCG, consumer durables, autos, and similar sectors," Arora said.