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Assessment of the Impact of GST Rate Restructuring on Consumers’ GST Liability in India

Author

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  • Mukherjee, Sacchidananda

    (National Institute of Public Finance and Policy)

Abstract

The GST rates for numerous items were recently revised, with the updated rates coming into effect on 22 September 2025. In this paper, we aim to assess the impact of GST rate restructuring on consumers’ GST liability using the National Sample Survey Office’s Household Consumption Expenditure Survey (HCES) for 2022-23. Depending on how rate reductions translate into lower prices, consumer behaviour is expected to change. Variations in the price and income elasticities of demand for goods and services will influence the size and composition of the consumption basket. However, we employ a static framework in which the price and income elasticities of demand for goods and services are assumed to remain constant from HCES 2022-23. Under these assumptions, the findings of this study suggest that GST liability on household consumption expenditure will decrease by 10% to 16% under the new GST rate structure compared to the previous one. The average GST liability rate will fall from 5-7% under the old structure to 4-6% under the new structure. We observe a one percentage point decline in GST liability across all MPCE fractile classes under the new GST rate structure compared to the old one.

Suggested Citation

  • Mukherjee, Sacchidananda, 2025. "Assessment of the Impact of GST Rate Restructuring on Consumers’ GST Liability in India," Working Papers 25/440, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:25/440
    Note: Working Paper 440, 2025
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    File URL: https://www.nipfp.org.in/media/documents/WP_440_2025.pdf
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    References listed on IDEAS

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    1. Mukherjee, Sacchidananda, 2023. "Distributional Impact of Indian GST," Working Papers 23/403, National Institute of Public Finance and Policy.
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    1. Mukherjee, Sacchidananda, 2025. "Distributional Impact of Indian GST based on the NSSO's Household Consumption Expenditure Survey of 2022-23," Working Papers 25/430, National Institute of Public Finance and Policy.

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • D30 - Microeconomics - - Distribution - - - General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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