GST cuts to boost domestic consumption, help in tackling headwinds: Market guru Anil Singhvi

Zee Business Managing Editor Anil Singhvi lauded a mega tax cut package delivered by the GST Council on Wednesday, shortly after Finance Minister Nirmala Sitharaman announced tax relief on hundreds of consumption items to spur domestic demand in a rare 10 pm press conference in the national capital. At its 56th meeting, the Council -- chaired by the finance minister and comprising state finance ministers and revenue officials -- approved lower taxes on everyday items while simplifying the overall structure.

The GST Council -- the government’s top indirect tax rate-deciding body -- approved a two-rate structure of 5 per cent and 18 per cent, doing away with the 12 per cent and 28 per cent rates, while introducing a new 40 per cent slab for select sin and luxury goods.

EDITOR'S TAKE | Great decisions, show Centre's intent to act, says Anil Singhvi

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The market wizard said the GST Council has made “great decisions” in its next-gen reforms.

The announcements are “commendable", likely to impart "long-lasting effects", and give a “big push to domestic consumption", Singhvi said, hoping that businesses would pass on the benefit of tax cuts to consumers.

“Today’s announcements are commendable and show the government’s clear intent to act,” he added.

'Biggest reform since corporate tax cut in 2019'

Describing GST 2.0 as the biggest reform since the corporate tax cut to 25 per cent in 2019, Singhvi said the estimated revenue loss for the government will be more than compensated in the long run, given the expected boost to consumption in the economy.

He was referring to the government’s landmark corporate tax cut in 2019, which aimed to boost investment, create jobs, promote growth, and make India an attractive investment destination.

“There are now two ways to deal with tariff terror: promote domestic consumption and find newer export avenues,” Singhvi said.

His remarks come days after the Trump 2.0 administration's additional 25 per cent tariff on Indian goods came into force, taking the total level to 50 per cent. Many eminent economists and financial experts have criticised America's harsh stance on its trade partners like India. Meanwhile, India has maintained its firm stand that its energy trade with Russia is both transparent and compliant, enabling it to protect domestic consumers while adhering to global norms.

Even if businesses pass on 70-80 per cent of the tax benefits to consumers, it will go a long way in supporting demand, said the market guru, adding: “Businesses will naturally tend to keep some profit for themselves, but they are expected to pass on the benefit to the end-consumer… We hope that rate cuts will be passed on."

“Practically, they are never passed on fully, but many of these benefits will surely be transmitted,” he added.