Did you know? GST reforms likely to lower rates on 11 of top 30 consumption items

New Delhi: The new Goods and Services Tax (GST) rates are set to benefit 11 of the top 30 consumption items, covering about a third of an average consumer’s monthly expenditure, a Crisil Ratings report said on Thursday.

These items include essential milk products, discretionary goods such as automobiles and beauty services, and processed food products, seeing higher demand in recent years.

"Rough calculations indicate the simple average GST rate based on these top 30 consumption items falls from 11 per cent to 9 per cent under the new regime," the report said.

The move is expected to boost purchasing power, particularly for low- and middle-income households, as the consumption-weighted average GST rate is lower for most food and household items, attracting either a 0 per cent or 5 per cent tax rate.

For some categories like clothing, footwear, and two-wheelers, GST rates have been reduced only for lower-value items. Crisil noted that this complements the Income-Tax relief announced in the Budget and will support demand.

"Furthermore, the adjustment can take time. For India, we expect the impact of GST cuts on consumption to play out over this fiscal and the next," the report added.

The rationalisation also affects automobiles. Entry-level small cars now attract 18 per cent GST, down from 29 per cent, while premium cars have an effective reduction from 50 per cent to 40 per cent, with the compensation cess removed. Crisil estimates an 8–9 per cent fall in entry-level car prices, 3.5 per cent in mid-sized SUVs, and 6.7 per cent in premium SUVs. IANS