New Delhi, Aug 20 (SocialNews.XYZ) A consumption boost of Rs 5.5 lakh crore will generate an additional Rs 52,000 crore in GST revenue in FY26, easily offsetting the projected revenue loss of Rs 45,000 crore from GST 2.0 reforms, according to a report on Wednesday.
GST 2.0 could unleash a consumption boost, resulting in higher tax revenue, lower inflation, and higher growth, said the report from SBI Research.
"The average revenue loss could come around Rs 85,000 crore. For FY26, it could be at Rs Rs 45,000 crore. Overall headline revenue loss likely to contained with a concomitant shift in sin goods from 28 per cent slab to 40 per cent slab," the report mentioned.
The GST 2.0 regime, while also involving an average revenue loss of Rs 85,000 crore, is estimated to have boosted consumption by Rs 1.98 lakh crore, it added.
Combined with tax cut, the total impact amounts to an additional Rs 5.31 lakh crore of consumption expenditure in the economy, equivalent to 1.6 per cent of GDP.
Analysts had earlier expressed concerns that the government's fiscal projections could be compromised if borrowing increases to offset revenue losses from GST tax cuts. However SBI Research countered this doubt saying, "Fiscal deficit for FY26 is unlikely to be breached. Debt Market fears thus appear somewhat myopically overblown."
On the inflation front, SBI Research said, the GST rate on essential items, including food and clothing, is expected to decrease from 12 per cent to 5 per cent. This change may lead to a reduction in CPI inflation in this category of 10–15 basis points, factoring in a 60 per cent pass-through effect on food items.
The rationalisation of GST rates for services will result in a 5-10 basis points reduction in CPI inflation for other goods and services, factoring in a 25 per cent pass-through effect. Overall CPI inflation is expected to be moderated by 20 to 25 basis points, it noted.
On an average, the Centre has exceeded the projected tax revenue by Rs 2.26 lakh crore in the last four years.
–IANS
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Source: IANS
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