Context:
The Union Government announced that recent GST rate cuts on 54 items have been effectively passed on to consumers, leading to higher demand and likely contributing positively to GDP growth and investment sentiment.
Key Highlights / Details:
- Government Position
- Union Finance Minister Nirmala Sitharaman stated that GST rate cuts have resulted in increased consumption and multiplier effects in investment and industry.
- Claims that in none of the 54 monitored items has the GST benefit been denied to consumers.
- GST reduction expected to boost GDP growth for 2025–26 by enhancing disposable income and demand.
- GST Council Decisions
- GST cuts announced on September 23 under GST 2.0 structural reform plan.
- Aimed at boosting electronics, FMCG, daily-use items, tractors, and automobile components.
- Decision aligns with PM’s “Reform, Perform, Transform” agenda and economic recovery efforts.
- Economic Impact
- Consumption-led growth expected; termed as “demand revival period.”
- Vehicle and tractor sales show strong growth due to GST cuts:
- Passenger vehicles ↑4%
- 2-wheelers ↑7%
- 3-wheelers ↑5%
- Tractors ↑4%
- Sharp rise in festive season sales shows market revival.
- Industry Support
- Commerce & Industry Minister Piyush Goyal: GST relief helping “ease of doing business.”
- I&B Minister Ashwini Vaishnaw: Tax cuts stimulating manufacturing and job growth.
- Opposition View
- Opposition alleges GST cuts are delayed and did not address structural GST issues faced by small businesses.
- Concerns raised over compensation to states and tax collections.
Relevant Prelims Points:
- GST Council → Constitutional Body under Article 279A.
- GST Types: CGST, SGST/UTGST, IGST.
- GST Compensation Cess → Given to states for revenue loss for 5 years (ended 2022).
- Anti-profiteering → Monitored by National Anti-profiteering Authority (NAA, now merged into CCI).
Relevant Mains Points:
- Role of GST reforms in economic recovery (GS-3: Indian Economy).
- Indirect tax rationalization and its impact on supply chains.
- Enhancing consumer demand and investment through fiscal policy.
- Centre-state financial relations and GST Council functioning.