The State Bank of India (SBI) said in its latest research report that reforms in GST through reduction in rates will cause a minimal revenue loss of Rs 3,700 crore. The government estimates the net fiscal impact of GST rates rationalisation will be Rs 48,000 crore on an annualised basis.
According to the report, given the growth and consumption boost, the minimal revenue loss is estimated at Rs 3,700 crore and will have no impact on the fiscal deficit. At the 56th meeting of GST Council held a few days ago, the current four-tier structure has been replaced with a two-tier one with a standard rate of 18 per cent and five per cent, and de-merit rate of 40 per cent on selected few goods and services.
The report said that the GST rate rationalisation will largely have a positive impact on the banking sector due to meaningful cost efficiencies. GST rate rationalisation has also brought down the effective weighted average rate from 14.4 per cent at the time of inception in 2017, which is expected to come down to 9.5 per cent, the report said.
When GST was introduced, the four rates were five per cent, 12 per cent, 18 per cent and 28 per cent. Since the GST rate rationalisation of 295 essential items has declined from 12 per cent to 5 per cent or zero, the consumer price index (CPI) inflation in the category may also come down by 25 basis points to 30 basis points in the current financial year, the report said. Overall, the CPI inflation may be moderated in the range of 65 basis points to 75 basis points over 2026-27, according to the report.
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