GST 2.0 promises ₹5,300 annual savings for Indian households, lifts GDP outlook: Report - CNBC TV18
India's eight-year journey under the Goods and Services Tax (GST) continues to reshape household budgets, industry cost structures and the broader consumption landscape, according to a new white paper from Dun & Bradstreet India. Titled "GST: the unification of India's indirect tax market" and authored by Dr Arun Singh, Global Chief Economist at Dun & Bradstreet, the study offers one of the most granular assessments yet of how GST has transformed spending patterns, formalised supply chains and reshaped India's domestic market architecture.
The white paper notes that "a typical Indian household now spends approximately ₹2,06,214 annually on GST-affected products," reflecting both the widening coverage of the tax system and the shift in consumption towards branded and GST-networked goods. As GST collections scale new heights, the study argues that the reform has become a structural backbone of India's domestic market, driving efficiencies whilst creating new fiscal challenges.
Consumption shifts under GST
The Dun & Bradstreet analysis highlights a significant shift in household consumption. GST has driven a gradual transition from unorganised to organised retail, with consumers increasingly purchasing tax-compliant products due to better availability, improved supply chains and rising seller compliance.
The white paper states that "GST has fundamentally altered the nature of consumer transactions by integrating informal suppliers into the formal economy, broadening the tax base and reducing tax cascading." This has brought greater pricing transparency, though several product categories now face higher tax incidence than under previous rates.
The ₹2,06,214 annual expenditure on GST-linked items represents over two-thirds of an average household's spending basket. This underscores how deeply the system is embedded across everyday purchases—from packaged food to consumer durables to digital services.
Impact on inflation and household budgets
Whilst GST was intended to be revenue-neutral at inception, Dun & Bradstreet's findings suggest its long-term impact on inflation varies across product categories. The report notes that GST eliminated embedded taxes, but higher rates in several segments—particularly services—have kept price pressures elevated to maintain revenue buoyancy.
According to the white paper, "the inflationary impact of GST has been uneven, with certain categories experiencing higher effective tax rates post-GST implementation, particularly services that moved from a 14.5% service tax to an 18% GST rate." This has shaped consumption choices, with some households moderating discretionary service spending.
However, GST-driven supply chain efficiencies—including reduced logistics time, streamlined warehousing and unified state-level tax structures—have contained price shocks in several fast-moving consumer goods.
GST’s role in strengthening market formalisation
One of the strongest themes in Dun & Bradstreet's white paper is the acceleration of formalisation across sectors. Dr Arun Singh writes that "GST has enhanced the competitiveness of formal enterprises by incentivising tax-compliant behaviour and creating a digital trail for transactions."
The e-invoicing framework, GSTN-linked compliance workflows and input tax credit mechanism have pushed informal players to either formalise or exit segments where compliance costs outweigh benefits. The shift is evident in retail, logistics, consumer goods manufacturing and small-scale services.
Formalisation has improved tax buoyancy, with monthly GST revenues now consistently crossing ₹1.7 lakh crore. Higher compliance, supported by data-backed enforcement, has also reduced evasion across several states.
Impact on states and centre: Complex balance sheet dynamics
The white paper also evaluates how GST has affected the fiscal balance between the Centre and the states. With compensation ending in 2022, many state governments increasingly rely on their GST share to manage capital expenditure and welfare commitments.
Dr Singh notes that "GST has improved the predictability of revenue flows for both the Centre and states, though disparities remain due to uneven economic bases and consumption patterns across regions."
States with stronger manufacturing or consumption footprints have benefitted from higher collections, whilst others remain dependent on the Centre's devolved transfers. The paper stresses that an expanded tax base through formalisation remains key to reducing these disparities.
Corporate sector gains from a unified market
The creation of a unified national market under GST has been one of India's largest structural transformations. Dun & Bradstreet's report underlines that removing interstate check posts and adopting a common tax structure have sharply improved logistics efficiency. Companies now operate fewer, larger warehouses instead of fragmented ones designed around state-level tax rules.
According to the white paper, "GST has unlocked significant working capital efficiencies and allowed firms to reconfigure supply chains around operational optimisation rather than tax arbitrage." This has spurred faster deliveries, better inventory planning and the ability to scale across regions without replicating infrastructure.
The study also highlights continuing challenges—including complexities around input tax credit reconciliation, evolving compliance norms and the need for uniform interpretation across states.
The road ahead: rate rationalisation and compliance simplification
Looking forward, Dun & Bradstreet argues that India may need to revisit rate structures to reduce classification disputes and improve compliance simplicity. Dr Singh writes that "a three-rate structure may offer an optimal balance between revenue needs and administrative simplicity, reducing the burden of interpretation for taxpayers."
The study also calls for further digital integration, greater clarity around tax positions and sustained efforts to enhance smaller businesses' capacity to remain compliant.