How much will inflation be reduced by changing GST rates? This shocking report of SBI Research has come.

SBI Research on GST: On Thursday, SBI Research said that in the 56th meeting of the GST Council held on Wednesday, two tax slabs of 5% and 18% have been approved in place of the existing four-tier tax rate structure.

SBI Research Report On GST: GST 2.0 was announced amid the ongoing trade tariff tension with the US. It is being said that due to the extensive change in GST rates, tax rates on essential household goods and services will be reduced. Along with this, it can help in reducing retail inflation by 0.65% to 0.75% in the next financial year. On Thursday, SBI Research said that in the 56th meeting of the GST Council held on Wednesday, two tax slabs of 5% and 18% have been approved in place of the existing four-tier tax rate structure.

What is going to be the impact?

Apart from this, a special rate of 40% has been fixed for some luxury and harmful goods and services. The new tax rates will be effective from September 22, except tobacco and related products. The SBI report further states that out of the 453 items for which GST rates were changed, rates of 413 items saw a reduction, while rates of only 40 items saw an increase. About 295 items now attract 5 percent or 0 GST rate instead of 12 percent.

Since the GST rate of essential commodities (about 295 items) has come down from 12% to 5% or 0, keeping in mind the impact of 60% benefit on food items to customers, the Consumer Price Index based inflation in this category may also come down by 0.25 to 0.30 percent in FY 2025-26.

Why can inflation come down?

If the SBI research report is to be believed, rationalizing GST rates on services will further reduce retail inflation on other goods and services by 0.40 to 0.45%. In this, customers are estimated to get a benefit of 50%.

According to the report, overall retail inflation may come down by 0.65 to 0.75% during the financial year 2026-27. Due to rationalization of rates by the GST Council, the effective weighted average GST rate has come down to 11.6 percent in September 2019, which was 14.4 percent initially. According to the report, given the current change in rates, the effective weighted average GST rate may come down to 9.5 percent.