GST Reforms and Two-Tier Structure to Boost Consumption and Economic Growth
Finance Minister Nirmala Sitharaman expressed confidence that recent GST rationalization, including a move towards a two-tier tax structure (5% and 18%) and a 40% slab, will bolster GDP growth by stimulating consumption. Despite an estimated revenue shortfall of ₹48,000 crore, the government expects revenue buoyancy to bridge this gap within the current fiscal year. The reforms aim to simplify the tax regime, making it a 'people's reform' that touches all citizens. Additionally, the exemption of GST on health and life insurance premiums is highlighted as a significant move to support the financial security of India's youthful population.
Key Points
- The GST Council approved a two-tier structure of 5% and 18%, along with a 40% peak slab for specific items.
- The government estimates the fiscal deficit for 2025-26 at 4.4% of the GDP, or approximately ₹15.69 lakh crore.
- GST 2.0 aims to reduce the tax burden on essentials and exempt critical services like insurance to increase household purchasing power.
- The reforms are expected to help the Indian economy exceed the projected real economic growth rate of 6.3-6.8%.
Exam Facts
- Fiscal deficit target for 2025-26: 4.4% of GDP (₹15.69 lakh crore).
- Economic Survey projected real economic growth: 6.3-6.8%.
- Proposed GST rationalization slabs: 5%, 18%, and a 40% peak rate.
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