GST Rate Cut: This report has dismissed all claims about how much the GST cut will increase the burden on the government.

New GST: According to the Crisil report, rationalising GST rates will bring more goods and services under the formal tax net, thereby boosting tax collection in the medium term.

GST 2.0: Following the central government's announcement of the Goods and Services Tax (GST) reform and the subsequent changes to the new tax slabs, state governments expressed concern about the impact on their revenues. The central government also acknowledged that the GST reform could increase the government's financial burden. However, a report suggests that the GST reform will not have any additional financial impact on the government.

There will be no burden on the government.

According to the rating agency Crisil, the recent changes in GST rates will not impose any fiscal burden on the government. In a report on Friday, the rating agency stated that the government is projected to incur a net loss of approximately ₹48,000 crore in the short term due to the GST rate cut, while total GST collections are projected to increase to ₹10.6 lakh crore in the 2024-25 fiscal year.

 

The report further stated that this revenue loss is not significant relative to total GST collections. It is worth noting that the GST Council recently revised the tax structure, rationalizing it into two slabs of 5 percent and 18 percent. This GST reform will become effective on September 22nd and will result in a reduction in the prices of many products and services.

Strength in tax collection

According to a Crisil report, rationalizing GST rates will bring more goods and services into the formal tax net, boosting tax collections in the medium term. Previously, 70-75% of GST revenue came from the 18% slab, while the 12% slab provided only 5-6% and the 28% slab provided 13-15%. According to the report, reducing taxes on goods in the 12% slab will not significantly impact revenue.

 

Meanwhile, rates on fast-growing services like mobile charges remain unchanged. New services like e-commerce delivery have been included in the GST slab and taxed at 18%. Crisil said the tax cut will boost consumers' real incomes, which could boost both demand and GST collections. However, this will depend on the extent to which producers pass on the benefits of the tax changes to consumers.