Nirmala Sitharaman Likely To Place GST Rate Overhaul Proposal Tomorrow

Finance Minister Nirmala Sitharaman is likely to present the Centre's proposal for rationalising goods and services tax (GST) rates before a Group of Ministers (GoM) at a two-day meeting starting August 20 in the national capital.

The GoM, headed by Bihar Deputy Chief Minister Samrat Choudhary, is slated to meet in person at Vigyan Bhawan on August 20 and 21, with proceedings beginning at noon, as per the report.

A six-member state panel is expected to deliberate on the Union government's plan to move to a simplified two-slab GST structure.

The GST Council is expected to meet on September 18-19 to take a final call on the proposal.

The proposed GST revamp comes at a time when global investment house Morgan Stanley has flagged tax reforms, along with other policy measures, as crucial in supporting India's consumption story.

In its latest report, Morgan Stanley said a likely overhaul of GST rates, together with income-tax cuts, policy easing, rising job growth and improving real wages, brightens the outlook for domestic demand.

The report added that while there could be some short-term slowdown in volume growth as consumers wait for clarity on the new tax rates, demand is expected to bounce back once the revised GST system comes into force.

Lower indirect taxes, it noted, tend to improve affordability for low-income households since indirect taxes are regressive.

According to the analysis, the proposed GST overhaul could amount to a stimulus of about 0.5-0.6 per cent of GDP annually, with the potential to lift GDP growth by 50-70 basis points.

It also projected a possible downside of 40 basis points in CPI inflation, although both the Centre and states may face short-term revenue pressures due to lower collections.

The government's proposal, aligned with Prime Minister Narendra Modi's Independence Day announcement of "next-gen GST reforms before Diwali," is built on three pillars: structural reforms, rate rationalisation, and ease of living. The new framework envisages two main GST rates -- 5 per cent for essential items and 18 per cent as the standard rate.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)