The 47th meeting of the Goods and Services Tax Council saw rates on several goods and services being hiked. The rate hikes come in an environment where inflation is high and could raise prices across these select items.
Inflation Concerns
Aditi Nayar, chief economist at ICRA, also said any rate rationalisation to boost state revenues at the brink of the end the GST compensation era, triggers fears of higher prices, at a time when high inflation already poses a concern. The moves may shift consumer preferences towards branded items, and level the playing field between branded and unbranded items, she added.
Yuvika Singhal, economist at QuantEco Research, agreed.
While the focus of the GST Council has been on rationalising rates and rectifying inverted duty structure, the wide-ranging hike in rate on several items of household consumption is bound to add another leg to the ongoing inflation run-up, Singhal said.
Specifically, with unbranded wheat and rice, several dairy items, honey, jaggery, puffed rice, among others, now attracting GST at the lowest slab of 5%, is bound to add to food inflation and perhaps marginally to inflation expectations, according to Singhal.
The inflation impact of GST rate rationalisation undoubtedly will be more pronounced on lower income households. Typically, the impact of GST rate hikes is seen to be captured in CPI inflation with almost immediate effect, expected to reflect in prints for July and August this time, Singhal said.
Also Read: The Complete List Of GST Rate Changes
RECOMMENDED FOR YOU
POPULAR