GST’s Impact on Inflation in India
- The inflationary impact of GST can be assessed by looking into the overall CPI (Consumer Price Index)
- In the estimation, the CPI was expected to be around 3.24%, but in actuality, it is 4.61%. This simply indicates that the CPI moved up by 1.37%.
- In case GST would have not been applied the expected CPI would have been around 3.24%.
- The CPI core inflation is not considered in the above assessment which applies to essential goods and services like food items and fuel.
- However, GST has proved to be quite beneficial in the case of the tobacco industry, as it generated great revenue from this industry with the highest GST rates.
Impact of GST on Inflation
GST was introduced in India to waive off indirect taxes on all goods and services and introduce a single direct taxation system, which will lower the prices of essential goods and services. But it seems like it didn’t happen, as of now in 2022, it’s more than 5 years after the launch of GST in India. Within 1 year of the launch of the GST, the CPI inflation increased from 3.66% to 4.24%. However many economists believe that an increase in the CPI in the initial phase was obvious and it aimed to maintain inflation rates for the long term.