GST Rate Rejig May Impact Fiscal Deficit Moderately

Despite a potential net revenue loss of ₹48,000 crore to the government due to the goods and services tax (GST) rates rejig effective September 22, analysts reckon it may have a modest fiscal impact of 5-40 basis points (bps) in the current financial year (FY26) as it might trigger an increase in overall demand, leading to higher growth.

- Puneet Wadhwa & Shiva Rajora

This impact too can be absorbed if the Centre goes for a compression in the capex by a mere 5 per cent, they contend.

Besides, the cut in the tax rate on nearly one-fourth of the essential and household items contained in the inflation basket may lead to a moderation of around 50-90 bps in retail inflation over the next 12 months.

Asset management company (AMC) Bernstein said that the net impact on the central government's fiscal deficit, assuming no capex adjustments, would be close to 20 bps. If capex is reduced by 5 per cent, the impact moderates to about 5 bps, the firm said in a statement on Thursday.