Revenue buoyancy driven by a spurt in consumption to take care of GST shortfall: FM

A few days after the announcement of GST Reforms, Finance Minister Nirmala Sitharaman expressed confidence that revenue buoyancy driven by a spurt in consumption will take care of the estimated GST shortfall of ₹48,000 crore following the reduction in tax rates on a host of items, and hence there will be no impact on public finances, but definitely bolster GDP growth.

She also emphasised that the consumption boost to be provided by the landmark GST reform and better-than-expected first quarter GDP growth numbers may help in exceeding the projected pace of 6.3-6.8% for FY26. Sitharaman said ‘I think the consumption spurt from September 22 will increase income buoyancy. To a large extent, this ₹48,000 crore amount we will be able to make it up this year itself. So I don't see an impact on my fiscal deficit or my fiscal management. I will stick to my numbers (of 4.4% of GDP).

Meanwhile, recently, the all-powerful GST Council headed by Sitharaman approved a two-tier structure of 5% and 18% taxes, as well as a 40% slab. Nearly 400 products - from soaps to cars, shampoos to tractors and air conditioners - will cost less when the rejig of the GST is effective from the first day of Navaratri on September 22. Premiums paid on individual health and life insurance will be tax-free.

Calling the landmark GST overhaul a 'people's reform', Sitharaman said that rationalisation of rates for a wide swath of products will benefit every family. She also noted that this is a reform that touches the lives of all 140 crore people. There is no individual in this country who is untouched by GST. The poorest of the poor also have something small that they buy, touched by GST.