Nearly a tenth of India’s retail inflation basket may get direct relief from proposed October GST cut

The reduction in rates from 12 percent to 5 percent too could have a positive impact on a number of sectors.

Nearly a tenth of India’s consumption basket could see direct relief from October if the planned GST rationalisation takes effect, a Moneycontrol analysis shows.

Inflation in these categories had touched an eight-month high of 2.9 percent in July, even as overall inflation slipped to an eight-year low of 1.6 percent.

Prime Minister Narendra Modi, in his Independence Day address, announced a Diwali gift for consumers, hinting at the next generation of Goods and Services Tax reforms.

“We are coming with the next generation of GST reforms, this will be a gift for you this Diwali. Taxes needed by the common man will be reduced substantially, a lot of facilities will be increased… Everyday items will become very cheap and that will also give a new boost to the economy,” the Prime Minister said in his longest I-Day address from the Red Fort.

The government has proposed removing the 12 percent and 28 percent slabs, shifting most items into lower brackets. Everyday consumables like butter, ghee, noodles and clothes—which currently attract a 12 percent duty—would fall to 5 percent, while durables such as air-conditioners and televisions are also likely to become cheaper.