Big GST Rate Cut: Will Indians Get Full Benefit? Ankit Agrawal Study IQ

Summary

The video discusses significant changes in India's GST system, effective from September 22, 2023, simplifying the structure to just two slabs: 5% and 18%. It highlights the potential benefits for consumers, including savings of up to ₹2.5 lakh crore annually, particularly for the middle class. However, concerns about companies passing on the benefits of reduced GST are raised, with the expiration of the anti-profiteering law in April 2025. The speaker emphasizes consumer awareness and the need for government regulation to ensure price reductions. The video also touches on Prime Minister Modi’s focus on economic self-reliance.

Takeaways

• 😀 GST rate cut begins on September 22, impacting consumers across India.
• 😀 Most goods will now fall under just two GST slabs: 5% or 18%, simplifying the tax structure.
• 😀 Luxury goods and big vehicles like SUVs may still face higher taxes (up to 40%).
• 😀 Health insurance is now exempt from GST, increasing accessibility to coverage for more people.
• 😀 The government aims to boost consumption and control inflation with the GST rate reduction.
• 😀 PM Modi's focus is on economic self-reliance and savings for consumers through tax cuts.
• 😀 Middle-class households are expected to save Rs 400-600 per month due to GST reduction.
• 😀 The middle class in India is defined by household incomes ranging from Rs 25,000 to Rs 1.5 lakh per month.
• 😀 The real benefit of the GST cut depends on whether companies pass the savings onto consumers.
• 😀 Companies in highly competitive markets like FMCG are more likely to pass on GST benefits, while oligopolistic markets (e.g., telecom, automobile) may not.

Q & A

What is the significance of the GST rate cut implemented from September 22?

The GST rate cut simplifies the tax structure and reduces the burden on consumers, leading to increased consumption and helping keep inflation in check. It mainly affects all individuals, whether rich or poor, and applies primarily through two slabs: 5% and 18%.

How did the GST structure change compared to when it was first implemented in 2017?

Initially, GST had multiple slabs: 5%, 12%, 18%, 28%, plus a cess on luxury and sin goods. The new structure reduces this to mainly two slabs: 5% and 18%, with only a few luxury items taxed at higher rates. Many goods previously in 12% or 28% have now moved to 5% or 18%, and some essential services are now taxed at 0%.

Which items are now taxed at 0% under the new GST regime?

Certain essential services like health care and insurance are now exempt from GST (0%), as the government responded to low penetration and opposition pressure to reduce the burden on consumers.

How much financial benefit is estimated for Indian consumers from the GST reduction and income tax relief?

The total estimated benefit is around Rs 2.5 lakh crore. This includes Rs 5000 crore from income tax relief for taxpayers and about Rs 2 lakh crore from the GST reduction, mainly benefiting households and the middle class.

Who qualifies as the middle class in India according to the transcript?

Definitions vary: NCAR defines middle class as households earning ₹35,000–₹1 lakh per month; the World Bank defines it as ₹10,000–₹1 lakh; and Credit Suisse defines it as ₹25,000–₹1.5 lakh. Generally, middle-class households will save ₹2,000–₹2,500 per month due to GST reductions.

What is the role of consumer awareness in benefiting from the GST reduction?

Consumer awareness is critical because if companies do not pass on the GST reduction in product pricing, the benefit may not reach consumers. Awareness allows consumers to track price changes and demand fair pricing.

What is the Anti-Profiteering Law, and why is it relevant to the new GST rates?

The Anti-Profiteering Law was implemented to ensure businesses pass on GST benefits to consumers. It lapsed in April 2025, so currently, there is no legal mechanism to enforce full benefit transfer, which raises concerns that some companies may not reduce prices fully.

How might competition in different markets affect the passing on of GST benefits?

In highly competitive markets like FMCG, benefits are likely to be passed on due to intense competition. In oligopolistic markets like telecom, automobiles, and cement, companies may deliberately retain higher prices, potentially reducing the benefit to consumers.

What example does the transcript provide to illustrate potential price changes due to GST reduction?

If a product was previously priced at ₹25 including GST, after the rate reduction, it should ideally be ₹22. However, some companies may only reduce it to ₹24, meaning consumers do not get the full benefit unless they actively check prices.

Which taxes were subsumed under GST when it was introduced?

GST subsumed multiple central and state taxes, including excise duty, service tax, VAT, central sales tax, luxury tax, entertainment tax, and other indirect taxes, simplifying the tax system and reducing tax cascading.

How does the GST reduction potentially impact India's GDP?

GST reduction boosts consumption, which contributes 55–60% of GDP. Higher consumption increases production and economic activity, which can positively impact overall GDP growth.

What is the potential annual savings for middle-class households due to the GST reduction?

Middle-class households can potentially save around Rs 24,000 to Rs 30,000 per year due to the new GST rate cuts on essential goods and services.