If the benefits of this cut are given to the customer, it can boost the country’s GDP growth.
It states that the decline in GST rate has a higher multiplier effect (1.08x) than direct taxes (1.08x).
The report said that the decline in income tax prices would have a positive qualities, which will increase the use of private use due to high disposable income. But GST has the most multiplier effect of income tax and corporate tax as it is an indirect tax that applies to the entire population in the sales location.
GST rates are on the verge of improvement and the second major financial stimulus in the financial year 26 will be marked after the personal income tax deduction announced in the government’s budget.
Currently, GST has several slabs, zero tax rates, Cent percent (mainly on gold, silver, diamonds and jewelry), Cent percent, 5 percent, 2 per cent and 2 per cent. In addition, the cut and polish diamonds are 5.5 percent on the diamond and 8.55 percent on the rough diamonds. On this, some items also attract additional taxes as a cess. According to the report, with multiple rates, the system has increased complexity. The same category products often face two different GST rates due to small differences in their characteristics.
For example, the report states that such questions have been seen in the toy industry. This complexity only increases the cost of business tax compliance, but also leads to less tax brackets in the wrong class of goods, which causes revenue loss.
The report estimates that due to the argument of GST rates, the annual revenue can be Rs. In order to offset these revenue uncertainty, Ambit suggested that the GST up to 40 percent can be applied to sin and luxury goods.
The report expects that the low rate of GST will benefit the use of discretion in high-ticketing items such as automobile and air conditioner during the demand for crop festival. On the other hand, categories like FMCG and Cement can only show minor profits due to their unstable demand.
The report also stated that simplification of GST rates can bring more in tax systems to bring more. In the past, many subtle, small and medium enterprises (MSMEs), who had previously avoided GST, would have realized that the benefits of being part of the formal economy will be higher than the cost.
Over time, this will help to increase the GST tax base and improve compliance.
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