Major industries plan to transfer the advantages of the reduced GST taxes to their consumers, as stated by the Finance Minister.
Finance Minister Nirmala Sitharaman addressed an event in Kolkata on "Next-Gen GST Reforms," where she announced a series of changes aimed at injecting nearly ₹2 lakh crore into the economy.
Sitharaman explained that despite the Centre retaining only about 23% of the Goods and Services Tax (GST) revenue, 41% of it still goes back to the States. She emphasized that the GST Council operates on the principle of equality, with both the Centre and States equally responsible for the outcomes of rate decisions.
The minister stated that the GST rate cuts and new reforms would have a significant impact on various sectors, although she did not provide specific examples. Sitharaman argued that the impact of GST rate cut on a particular sector would be 10 times higher than the benefit the sector would have got from a Production Linked Incentive (PLI) scheme.
However, Sitharaman did not provide a timeline for the implementation of these changes. She did mention that higher demands resulting from the GST rate cuts could lead to higher employment generation.
The opposition has been putting pressure on the BJP-led Central government, seeking compensation for potential revenue loss from GST rationalisation. However, Sitharaman clarified that the Centre is not considering any compensation for States due to potential revenue loss from the GST rate cuts.
Sitharaman also pointed out that more production due to higher demand would require companies to invest more and produce more. To further boost production, she mentioned that PLI was given for semiconductor manufacturers and automobile manufacturers to incentivize them to produce in India.
Regarding the sectors that have expressed intentions to pass on the GST rate cut benefits to customers, Sitharaman mentioned that most sectors have shown willingness to do so. However, she did not provide details about the specific sectors. The sectors in India that have announced passing on the benefits to customers after the GST rate cut include the automobile industry, fast-moving consumer goods (FMCG), and insurance. Additionally, the overall consumer demand boost may also benefit sectors such as cyclical retail and non-banking financial services.
Sitharaman also stated that there is no "donor-donee relationship" within the GST Council, reinforcing the principle of equality in the decision-making process. She did not provide details about the sectors that have expressed intentions to pass on the GST rate cut benefits to customers.
The announcement of these GST rate cuts and reforms comes at a crucial time, with the Indian economy showing signs of recovery from the pandemic-induced slowdown. The implementation of these changes is expected to further boost economic growth and employment opportunities in the country.
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