GST rate cut booster: Nilesh Shah, MD and Kotak Mahindra AMC, hailed the government’s goods and services tax (GST) booster, calling it a step in the right direction.
Nilesh Shah said that GST slab consolidation and rate rationalisation is “ek teer kai nishaan” as he believes it will tackle multiple problems at once, including helping offset the tariff impact from the levies of 50% imposed on India by the US President Donald Trump.
The Finance Minister Nirmala Sitharaman last evening announced tax cuts for hundreds of consumer items, from soap to cars, in the biggest overhaul of the goods and services tax, set to take effect from September 22.
India will have two key tax rates of 5% and 18% from September 22, versus four now. A new tax slab of 40% will apply to high-end goods, but all additional levies above that are to be abolished.
“The latest GST announcement lowers inflation, increases growth, boosts consumer sentiment, doesn’t disturb the path of fiscal consolidation, improves ease of doing business and partially offers adverse effects of tariffs,” said Shah.
Meanwhile, as investors and economists remain concerned about the impact of the US tariffs on India, Shah added that the rationalisation of GST will partially help offset the adverse impact of US tariffs in the quarters to come.
Is GST rate cut fiscally prudent?
While some might be concerned about the fiscal prudence of the GST rate cut, Shah believes that the Diwali gift of ₹48,000 crore is fiscally manageable.
The government estimates the cuts will cause revenue loss of ₹48,000 crore ($5.5 billion), far lower than economists’ estimates ranging from ₹1 lakh crore to ₹1.8 lakh crore.
Nilesh Shah further added that savings misallocation happening through F&O speculation and Ponzi schemes, making Indians quick money addicts, costs more than four times the GST gift.
“Completing two days of GST council meeting in one day does show the urgency. While the leakages and fraud of GST need to be dealt with an iron hand, process improvement should be a continuous affair with a feedback loop,” Shah added.
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