GST cuts passed on, spurred consumption, may show in GDP: Govt, Pg1.

Key Highlights:

• The government highlighted the positive impact of GST 2.0 reforms, implemented on September 22, on consumption and potential GDP growth for FY 2025-26.
• Finance Minister Nirmala Sitharaman reported that the benefits of GST rate cuts are being passed on to consumers, leading to increased purchases.
• Prices of 54 daily-use items are being monitored, with most showing passed-on tax benefits, except some cement varieties.
• Electronics and consumer goods sales have seen a sharp jump, with retail chains reporting a 20-25% increase compared to last year.

Detailed Insights:

• The GST 2.0 reforms replaced multiple tax slabs with a broad two-slab structure: a merit rate of 5% and a standard rate of 18%, plus a 40% demerit rate for sin goods.
• The government expects consumption to increase by over 10% this year due to GST reforms, potentially adding Rs 20 lakh crore to the economy.
• Increased consumption is expected to drive investments, strengthening the link between consumption and investment and reinforcing economic growth momentum.
• The GST Council, including representatives from states and the Centre, approved GST 2.0 following PM Modi's Independence Day announcement.

Key Concepts Involved:

• Goods and Services Tax (GST): An indirect tax levied on the supply of goods and services.
• GST Council: A constitutional body responsible for making recommendations on GST-related issues.
• Fiscal Room: The capacity of a government to finance its spending plans.