GST revamp: FM Sitharaman says Rs 48,000 crore shortfall won’t hit public finances; sees boost to GDP

Finance minister Nirmala Sitharaman expressed confidence that higher consumption will generate enough revenue to cover the estimated Rs 48,000 crore shortfall in Goods and Services Tax (GST) collections after the latest rate cuts. Hence, she stressed, public finances will remain unaffected and the move would rather boost GDP growth.She added that the consumption lift from the GST overhaul, together with stronger-than-expected first quarter GDP growth, could even help the economy surpass the projected 6.3–6.8% growth range for FY26.

Speaking on the possible fiscal impact, FM Sitharaman said that the Rs 48,000 crore figure was a static amount based on a base year, but the base situation changes upon implementation.“So, I think the consumption spurt from September 22 will increase income buoyancy. To a large extent, this Rs 48,000 crore amount we will be able to make it up this year itself. So I don’t see an impact on my fiscal deficit or my fiscal management. I will stick to my numbers (of 4.4% of GDP),” she told PTI in an interview.The government targeted a fiscal deficit of 4.4% of GDP, or Rs 15.69 lakh crore, for 2025–26.Last week, the GST Council, chaired by FM Sitharaman, approved a two-tier structure of 5% and 18%, along with a 40% slab. Close to 400 items, from soaps, shampoos and groceries to cars, tractors and air conditioners, will become cheaper when the revised rates take effect from September 22, the start of Navaratri. Premiums on individual health and life insurance will also be exempt.In the new structure, most food and grocery products will be taxed at 5%, while essentials such as bread, milk and paneer will attract no tax. Electric vehicles and small cars will fall under the 5% slab, while other white goods will face 18%, both lower than current levels.Calling the GST overhaul a “people’s reform”, Sitharaman said it would bring benefits to households across the country.“This is a reform which touches the lives of all 140 crore people. There is no individual in this country who is untouched by GST. The poorest of the poor also have something small that they buy, touched by GST,” she said.When asked if the stronger first-quarter GDP figure of 7.8% and the expected consumption boost could lead to an upward revision in this year’s growth forecast, the finance minister replied, “possible, very much possible.”The Economic Survey had projected real growth at 6.3–6.8% for FY26. The 7.8% expansion in April–June was driven by strong farm output and a boost from services such as trade, hotels, finance and real estate.The previous highest growth rate was 8.4% in January–March 2024. India remains the fastest-growing major economy, ahead of China, which recorded 5.2% growth in the same April–June period.