The Central government has not conducted any formal assessment of the revenue or inflationary impact of GST rate rationalisation, the Lok Sabha was informed on Monday.
In a written reply, Minister of State for Finance Pankaj Chaudhary stated that no dedicated study has been undertaken to evaluate how GST rate changes have influenced inflation, consumption patterns or sectoral growth.
Relief Expected Despite Lack of Formal Analysis
While acknowledging the absence of formal studies, the minister emphasised that GST rate reductions are expected to deliver both direct and indirect benefits. Lower tax rates can reduce the burden on essential goods and services, thereby:
- Improving affordability
- Reducing cost of living
- Supporting household consumption
- Encouraging investment
GST Collections Show Steady Growth
Despite ongoing rate rationalisation, GST collections continue to remain strong. As per the latest data, gross GST revenue grew by 8.1% in February 2026 compared to February 2025, reflecting steady economic activity.
Boost to Compliance and Formalisation
The government highlighted that GST reforms are expected to:
- Reduce transaction costs
- Simplify compliance
- Encourage the formalisation of businesses
- Widen the tax base
Sector-specific rate adjustments are also aimed at enhancing competitiveness. Key sectors likely to benefit include:
- Construction (lower costs)
- Automobiles (higher demand)
- Healthcare (better access to essential drugs and devices)
- MSMEs, especially labour-intensive sectors like toys, handicrafts and man-made fibres
Economic Indicators Signal Positive Momentum
Recent high-frequency indicators suggest strengthening economic momentum following GST reforms, particularly during September–December 2025. These include:
- Increased e-way bill generation
- Improved PMI in manufacturing and services
- Record festive-season automobile sales
- Surge in digital payments via Unified Payments Interface
- Growth in tractor sales
Additionally, the National Bank for Agriculture and Rural Development (NABARD) survey (November 2025) found that 79.2% of rural households reported higher consumption expenditure, the highest in FY2025-26 so far.
GST Council to Drive Rate Decisions
On maintaining fiscal stability, the minister clarified that GST rate decisions are made based on recommendations of the GST Council, a constitutional body comprising representatives from both the Centre and states.
He further noted that states operate under their respective Fiscal Responsibility and Budget Management (FRBM) Acts, with borrowing limits aligned to Finance Commission recommendations and monitored under constitutional provisions.
Periodic Review Planned
The government intends to periodically review GST rates through the GST Council mechanism to strike a balance between revenue generation and consumer welfare.
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