What is the news:
The GDP edge for FY26 is an estimate of 6.2% and consumer inflation 2.7%. The government is preparing to include two main slabs (5% and 28%) and 40% new slabs by seaming four slabs of GST.
New Delhi: Economic estimates remain that GDP will be 6.2% in the next financial year and consumer inflation will be 2.7%. The government is considering changing the large system of GST. This change has been pending for years and now again came into the discussion at the plan level.
Currently GST is at four rates – 5%, 12%, 18%and 28%. The proposal is to remove 12% and 18% to keep only 5% and 28% main and bring a new slab of 40% for wrong or luxury things. They can protest due to the impact on the income of the states, so the possibility of keeping high revenue goods and services in high slabs is being told.
The impact of this change can look something like this on the common people and the economy: the theoretically reduced GDP by decreasing the slab to a 0.19%; Inflation can normally see a decline as many things will be reduced. However, about 22% of the items coming in 12% slab is in consumer-cart and about 5% in 28%. Last time, companies did not reduce their margins by not lowering such changes, so the prices cannot be reduced immediately.
Further process will be political: A group of ministers will discuss this week and the GST Council will hold a meeting in September. If agreed, the new structure may apply till Diwali. Financially, the largest indirect income of the government comes from the items that have less than 18% tax, so the huge impact is low. Currently, fiscal deficit is estimated at 4.4% of GDP, while the possibilities of replacing the current company cess are also being seen.
In short: GDP for FY26 is estimated at 6.2% and inflation 2.7%. Four slabs of GST are proposed to slab two (5% and 28%) and 40% new slabs. Removing 12% and 18% has raised questions on economic impact and state income. Effect on consumer: slow in procurement initially; Demand may increase in the festive season. Process: GOM this week, GST Council in September; It can occur till Diwali when implemented.
