More than 75% of rural monthly expenditure will face nil or 5% rate under GST 2.0: FICCI

More than 75% of the items rural Indians spend money on will face either a nil rate of Goods and Services Tax (GST) or 5% once the new rates come into effect on September 22, according to an analysis published by the Federation of Indian Chambers of Commerce & Industry (FICCI). For urban Indians, this proportion will be 66%.

The report, prepared by Thought Arbitrage Research Institute (TARI) for the FICCI Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), noted that this situation was a significant improvement over the current GST rate structure.

According to the analysis, about 56% of rural household monthly expenditure currently attracts either nil GST or a 5% rate. For urban households, that proportion is currently about 50%.

The study compared the item-wise GST rates with the government’s monthly per capita expenditure data in rural and urban India on these same items. 

What it found was that 29.1% of the items under the current GST rate structure face nil GST. These items account for 36% and 32.3% of rural and urban per capita household expenditure, respectively. 

Under GST 2.0, the nil slab will comprise 29.9% of the total items. The items in this slab will account for 36.5% and 32.9% of rural and urban monthly expenditure, respectively.  

About 14.7% of the total items face a 5% GST rate, and account for 20.3% and 18.2% of the rural and urban monthly expenditure. From September 22 onwards, the 5% slab will comprise 40.5% of the items, and will account for 38.8% and 33.3% of the rural and urban expenditure, respectively.

The 12% slab currently accounts for 21.5% of the items, and 14.4% and 10.8% of the rural and urban monthly expenditure. That slab will no longer exist after September 22. 

The 18% slab currently accounts for 26.6% of the items under GST, and 15.4% and 16.9% of the rural and urban monthly expenditure, respectively. Under GST 2.0, this slab will comprise 23.1% of the items and 12.3% and 14.1% of the rural and monthly expenditure. 

The report does not separately specify the data for the 28% slab, but includes data on items in the ‘equal to or greater than 28% category. This category accounts for 2.2% of the items currently, and 1.7% and 2.3% of the monthly rural and urban per capita expenditure. 

This category, which includes the new 40% slab under GST 2.0, will account for 0.5% of the items and 0.2% of the rural and urban monthly expenditure.