New GST rates may lower CPI inflation by 20 bps: Nomura
Mumbai, Nov 14 (PTI) Decision to lower GST (goods andservices tax) rates on over 200 items could help pull downretail inflation by 20 basis points from the current levelsdriven by lower food and beverage prices, says a report.
Retail or CPI inflation rose to 7-month high of 3.58per cent in October, driven up by costlier food items,particularly vegetables.
According to global financial services major Nomura,recent decision by the central government to lower tax ratesfor 213 items including 178 items of daily consumer use islikely to lower CPI inflation by about 20 basis points (0.2per cent).
"The government expects these (GST) measures to bedisinflationary. Our quantitative analysis suggests that if (abig if) the GST tax changes are fully passed on to consumers,they would lower CPI inflation by estimated 20 basis points,"Nomura said.
"This would be driven by lower food and beverage(chocolate, condensed milk and fish), household goods(detergent, sanitary ware and glassware) and personal care(shaving products, shampoos and cosmetics) prices," it added.
During the 23rd Goods and Services Tax (GST) councilmeeting, tax rates were lowered for 213 items. The largestchanges were made in top 28 per cent tax bracket, where 178(out of 228 items) were moved into the 18 per cent taxbracket.
Tax rates on items ranging from chewing gum to chocolatesto beauty products, wigs and wrist watches, were cut toprovide relief to consumers and businesses amid economicslowdown.
As many as 178 items of daily use were shifted from thetop tax bracket of 28 per cent to 18 per cent, while a uniform5 per cent tax was prescribed for all restaurants, both air-conditioned and non-AC.
The new tax rates will be effective November 15. PTISSMNRB.
This is unedited, unformatted feed from the Press Trust of India wire.