GST cut benefits passed on all 54 daily-use items: Sitharaman

Benefits of next-generation Goods and Services Tax (GST) reforms and rate reductions are reaching end consumers, with the consumption cycle expected to extend well beyond the festive season, the government said on Saturday. In the first official assessment of consumption trends since GST rate cuts took effect on September 22, top Union Ministers said the expected benefits of the tax cuts had reached consumers across all 54 items of daily use reviewed under the new GST regime.

“There is not one item among 54 being monitored by our zonal offices where tax benefit has not reached the consumers,” Finance Minister Nirmala Sitharaman said today delinking next-generation GST reforms from the US tariff issue.

She said these reforms had been in the making for over a year when US tariffs were not even in the picture. Sitharaman added that the surge in consumption across the consumer durables and FMCG sectors, as reported by the government, was not driven by pent-up demand following Prime Minister Narendra Modi’s August 15 GST reform announcement.

“The virtuous cycle (of enhanced demand, consumption and resultant investment) will sustain and the consumption story will continue,” the FM said, adding that for many goods, more tax cuts were being passed on than expected by way of weighted average on account of rate reductions from 12 per cent to 5 per cent and 28 per cent to 18 per cent.

Nirmala ticks off Cong

Responding to questions on Congress remarks that GST reforms are course corrections and on state government concerns around revenue loss, the FM said, “We set the course for GST. We implemented it. The Opposition did not even dare to attempt it. This is not course correction. This is conviction. As for states talking revenue loss due to GST, we call it revenue impact. There is no Mai Baap here. GST revenues are good for the Centre and the states. I am not sitting here with a bag of money.”

Commerce and Industry Minister Piyush Goyal described GST cuts as the most memorable post-Independence reform, listing “historic” auto sales by Maruti, Mahindra and Tata and tax cuts on across health, insurance and daily use items to boost affordability.

Electronics sales, the government said, have registered a record with 25 per cent more sales this Navratri compared to the last. The sector employs 25 lakh people and is witnessing a double-digit growth, said Electronics and IT Minister Ashwini Vaishnaw.

Based on current GST reform-driven consumption trends, the government estimates an additional Rs 20 lakh crore in demand this year — a development that could help offset the impact of US tariffs.

“Last year, our GDP was Rs 335 lakh crore, of which Rs 202 lakh crore came from consumption and Rs 98 lakh crore from investment. Consumption grows naturally, but because of GST reforms, consumption will rise and it is very likely that it will grow more than 10 per cent this year which means extra consumption of Rs 20 lakh crore compared to last year. Also, Rs 98 lakh crore investment will rise too as private investment comes in due to growth in demand,” Vaishnaw explained, announcing the start of production at India’s second semiconductor plant last week.

The government also said GST reforms had led to food deflation over the past four months.

Sitharaman gave a detailed account of several items, including tractors, where costs had fallen as the benefits of GST rate cuts were passed on to consumers.

“Barring high-end Portland variety of cement, where expected rate of GST cut has not been passed, on most items consumers are getting the benefit,” Sitharaman said, admitting that the government was engaging with manufacturers and retailers of ghee and cheese to bring down taxes to expected levels.

Since the rollout of the new GST reforms, the government has received 3,169 grievances, most relating to perceptions about tax slabs and rates. Of these, 94 have been resolved by the Consumer Affairs Ministry, while 3,075 have been forwarded to the Finance Ministry for resolution.