GST: Lower Inflation In Theory, Not In Practice, Says Nomura
By Team Legistify / 2017-05-30

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The Goods and Services Tax (GST) rates are expected to lower inflation by 2 percentage points, according to government estimates. While this may be true on in theory, things may differ in practice, a recent Nomura report said.

The report measured the mathematical impact of the GST rates on 196 items, which form about 87 percent of the consumer price index by weight.

It found that the direct reduction in tax incidence could lower CPI inflation by around 33 basis points. The reduction would be mainly due to a 60-basis-point decline in food price inflation. However, core inflation is expected to rise 60 basis points due to increased taxes on several services, Nomura said in its global markets research report on Friday.

The chart here shows how the GST rates will impact goods and services in the CPI basket.

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