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Reserve Bank of India says GST won’t raise inflation



Reserve Bank of India

The implementation of the goods and services tax (GST) has disturbed businesses, supply chains and to some extent consumption as well. But when it comes to direct inflation, GST is possible to have minimal or no impact at all. According to the Reserve Bank of India’s monetary policy, that GST is non-inflationary. They reported that GST covers more than 50% of the Consumer Price Index (CPI) basket. The impacts on the CPI basket had shown in the chart. The report suggests for every product where its price increase due to higher taxation if there is a fall in offsetting the price. Prepared meals, clothing and footwear, and amusement, recreation will see price increases, while prices slip in personal care and food sub-groups like spices and pulses. At best, GST will result in 10 basis points increase in the headline CPI inflation number.

Read also GST Penalty: Taxmen Slap Huge penalty to Check Evasion of GST

Reserve Bank of India says GST won’t raise inflation

Reserve Bank of India says GST won’t raise inflation

But, the central bank remarked that a one-off increase in prices could be seen in the first year of the reformed tax implementation because companies will choose to hike prices initially. A dipstick survey of price movements of 18 commodities by RBI, consumer durables which are dominated and fast-moving consumer goods showed the weighted average price has gone up by 0.8%.

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