New Delhi: The government has taken steps to ensure a bigger effect of GST on rural households, a day after the goods and services tax was introduced.
The Centre on Thursday announced that the new goods and service tax will not be applied to agricultural products such as sugarcane and pulses, and will only apply to consumer durables like clothes and footwear.
The GST will be introduced on July 1.
The new tax will be applicable on everything except basic commodities like rice and wheat, which have been exempted for the last two years.GST will affect about two-thirds of India’s population of 1.25 billion, with the main beneficiaries being the rural poor.
India’s finance ministry said in a statement that it would be “more transparent” about how GST will impact the economy, noting that it will have the same effect on the poor as a tax on the rich.
The move is a welcome boost for the Modi government, which is facing a major cash crunch as it tries to shore up the economy after the demonetisation drive.
But the move comes as many economists fear it will not make much of a dent on inflation, which remains at a high level.
The GST will help lower the cost of living in the country.
According to a report by the World Bank, the impact of GST is expected to be about $600 billion by 2022.
The main benefits to the poor are the reduction of the cost to consume goods and the reduction in the cost and burden of transporting goods, which will lead to an increase in household consumption.