GST promises to not be inflationary for household budget and families may manage to make some savings in their family budgets once the new taxes are rolled out.
GST rates on many common household goods have been kept low even as GST rates on 1211 goods and services have been decided and have been fixed at 5 per cent, 8 per cent, 12 per cent, 18 per cent and 28 per cent.
But it's the essential common household items that most common households are looking at, and some of that will attract a 'zero' GST.
For instance, products like fresh or pasteurised milk, fresh fruits and vegetables, unprocessed cereals, puffed rice, papad, bread, unprocessed meat, among others are some of the household goods that will not be taxed under the new GST regime, bringing relief to most households.
Among other items that have been taxed at the marginal rate of 5 per cent come honey, paneer, yogurt, milk powder and cream, processed coffee and tea, and some other processed spices like cardamom, nutmeg, etc.
In the 12 per cent category, milk products like butter, cheese, frozen or salted meat, and other namkeen are products that are taxed at higher rates.
It was largely expected that GST could prove inflationary given that countries that have adopted the GST have seen such pressures building up. However, Revenue Secretary Hasmukh Adhia recently told the agencies that inflation will fall by 2 per cent on the implementation of the GST.
In a recent report, Kotak Securities mentioned that it does not see any major impact of the new tax rates on inflation.
Aditi Nayar, Principal Economist, ICRA commented: "With the effective tax rate intended to be brought down on most items, as well as a large portion of the CPI basket being kept in the exempted category, there is likely to be a limited impact of the GST on goods inflation. Although the standard rate for services has been kept at 18 per cent, availability of input tax credit going forward may soften the impact of GST on services inflation."
A key issue, however, that will be keenly watched in the coming days is the implementation of the GST, which is expected to be rolled out from 1 July. A seamless implementation can also bring down the rate of inflation, according to experts.
Consumer inflation in the country, which largely comprises of food articles, has slipped to 2.99 per cent as per the latest RBI release.