In response to two Lok Sabha questions, the Ministry of Finance clarified the impact and assessment of recent GST rate reductions. The Government stated that no formal, sector-specific study has been conducted to measure the impact of GST cuts on manufacturing, services, MSMEs, or specific sectors such as textiles, automobiles, and hospitality in Maharashtra, nor on employment generation or consumer demand. No special fiscal support for Maharashtra is under consideration. However, the Government confirmed that full provisional GST compensation for the period July 2017 to June 2022 has been released to all States, and final reconciled compensation has also been paid to Maharashtra up to FY 2022–23. Separately, the Government explained that GST reforms recommended by the GST Council in September 2025 rationalised the tax structure into a two-rate system, reduced or eliminated GST on essential goods, life-saving medicines, insurance, and agricultural inputs. While no quantified assessment exists, the reforms are expected to improve affordability, consumption, compliance, and economic momentum.

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE

LOK SABHA UNSTARRED QUESTION NO. 418
TO BE ANSWERED ON MONDAY, THE 02^nd FEBRUARY, 2026/ 13 MAGHA, 1947 (SAKA)

Impact of GST Reduction

418 SHRI MOHITE PATIL DHAIRYASHEEL RAJSINH:
SMT. SUPRIYA SULE:

Will the Minister of FINANCE be pleased to state:

(a) whether the recent reduction in GST rates has had any measurable effect on the manufacturing and service sectors in Maharashtra, particularly in MSMEs and textile, automobile and hospitality industries and if so, the details thereof;

(b) whether the GST reduction has resulted in increasing consumer demand and employment generation in these sectors and if so, the details thereof;

(c) the details of the sector-wise economic growth recorded in Maharashtra after the reduction of GST rate;

(d) whether the Government proposes to provide any special fiscal or policy support to Maharashtra to offset short-term revenue losses while encouraging long-term industrial recovery and growth, if so, the details thereof; and

(e) the steps taken by the Central Government to ensure timely and adequate release of GST compensation to States, including Maharashtra, especially after recent tax rationalizations?

ANSWER

THE MINISTER OF STATE IN MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)

(a) to (c): No formal study has been conducted on the impact of the GST rate reductions on the different sectors of the economy in the country.

(d) No such proposal is under consideration of the Government.

(e) Government of India has released the entire amount of provisionally admissible GST compensation to all the States for loss of revenue arising on account of implementation of Goods and Services Tax for five years i.e., from 1^st July, 2017 to 30^th June, 2022. Final Compensation arising out of reconciliation of provisional figures with audited figures has also been released to the State of Maharashtra for FY 2017-18 to FY 2022-23.

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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
LOK SABHA
UNSTARRED QUESTION NO. 295

TO BE ANSWERED ON MONDAY, FEBRUARY 02, 2026/MAGHA 13,
1947 (SAKA)

ASSESSMENT OF THE REDUCTION IN GST RATES

†295. DR. MANNA LAL RAWAT:

Will the Minister of FINANCE be pleased to state:

(a) the Government has recently reduced the rates of Goods and Services Tax (GST) applicable on various goods and services;

(b) if so, the details of the revised rates, item-wise;

(c) whether the Government has any assessment of relief received by common people and investors directly or indirectly from the reduction in GST rates; and

(d) if so, the key findings of the said assessment?

ANSWER

MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)

(a) The GST reforms recommended by the 56th GST Council in its meeting held on 03.09.2025 aimed for a strategic, principled, and citizen-centric evolution of the tax framework.

The quantum of the reform is demonstrated by the rationalisation of the earlier 4-tiered tax rate structure into a citizen friendly 'Simple Tax' – a 2-rate structure with a Standard Rate of 18% and a Merit Rate of 5%; a special de-merit rate of 40% is prescribed for a select few goods and services.

Significant rate rationalisation focuses on the common man, labour intensive industries, farmers and agriculture, health. This includes the exemption of GST on all individual life and health insurance policies , reduction on many common man items (e.g., hair oil, soap bars, bicycles) from 18% or 12% to 5% , reduction of GST from 12% to NIL on 33 lifesaving drugs and medicines and from 5% to NIL on 3 lifesaving drugs & medicines used for treatment of cancer, rare diseases and other severe chronic diseases , and reduction on various agricultural goods and machinery to 5%.

(b) The revised GST rates item-wise is enclosed as Annexure A. The same has been notified vide Notification No. 9/2025, 10/2025, 15/2025 & 16/2025 – Central Tax (Rate) dated 17^th September 2025.

(c) & (d) While a specific study or assessment of relief received by common people and investors has not been conducted, however, the reduction in GST rates is expected to provide direct and indirect relief to common people and investors by lowering the tax burden on essential goods and services, thereby improving affordability, reducing cost of living, and supporting household consumption. The rationalisation of rates is also expected to reduce transaction costs, ease compliance, encourage greater formalisation, and widen the tax base. Sector-specific rate reductions are expected to support competitiveness and investment by lowering costs in construction, boosting demand in automobiles, improving access to life-saving drugs and medical devices, and promoting labour-intensive MSMEs such as toys, handicrafts and man-made fibres.

Recent trends in high-frequency indicators, including higher e-way bill generation, improved Purchasing Managers' Index (PMI) readings for manufacturing and services, record festive-season automobile sales, robust UPI transactions, and increased tractor sales, indicate a strengthening economic momentum during September-December 2025, following the implementation of GST reforms. Furthermore, as per the NABARD Rural Economic Conditions and Sentiments Survey (November 2025), 79.2% of rural households reported increased consumption expenditure in the last one year, the highest among all bi-monthly rounds in FY 2025-26 so far.