With a more ‘simplified’ Goods and Services Tax (GST) structure in place now that the GST Council has axed two tax slabs – the 12 per cent and the 28 per cent slabs – to have just the 5 per cent and 18 per cent tax sabs in place, India is set to receive a consumption-based growth.
As more essential items become cheaper, there is increased demand expected in the retail, micro, small and medium enterprises (MSMEs), as well as the agricultural sectors, said Ajay Kumar Srivastava, Managing Director and CEO, Indian Overseas Bank (IOB).
"The GST Council's decision to simplify the tax structure from the current four slabs – 5,12,18 and 28 per cent, to a two-rate structure of 5 and 18 per cent will make taxation more transparent and easier to follow," he said, adding that the measures will drive an estimated growth of over 8-10 per cent in the rural markets over the next two quarters.
"We expect these measures will drive an estimated growth in consumption over 8-10 per cent in the next two quarters in rural markets, particularly benefitting farmers through reduced costs on agricultural products where GST has been brought down from 12 per cent to 5 per cent," he said.
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With major price cuts in not only essentials like dairy products and household items but also vehicles, electronics and housing materials, Srivastava said there is expected to be a strong effect across the economy of India.
“The reduced GST on vehicles, electronics and housing materials will create demand in these segments, while making insurance policies completely tax-free will enhance financial inclusion, leading to a strong effect across the economy, improved cash flows for distributors and retailers, greater working capital access for small businesses and expanded credit requirements, he noted.
"Overall, this decision acts as a catalyst for inclusive growth and economic transformation, aligning itself to India's vision of Viksit Bharat," he added.
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