Reduction in GST Slabs
The Indian Prime Minister and Finance Minister have reduced the GST slabs to two: 5% and 18%. This move is a strategic response to global trade uncertainties, like the U.S. imposing a 50% tariff on Indian goods.
- Fiscal challenges remain for states, as revenue from different slabs contributes as follows:
- 5% slab: 6-8% of collections
- 12% slab: 5-6% of collections
- 18% slab: 70-75% of collections
- 28% slab: 13-15% of collections
Impact on Andhra Pradesh
- GST collections surged by 21% in August 2025, reaching ₹3,989 crore.
- Potential annual revenue loss due to rate cuts estimated between ₹1,500 crore to ₹7,000 crore.
Supply-Side Measures
To counter potential revenue losses and meet increased demand, the State and Central governments need to implement supply-side measures actively.
Examples of Impacted Sectors
- Cement and Construction:
- GST on cement reduced from 28% to 18%.
- Further reductions on materials like marble and sand-lime bricks from 12% to 5%.
- Construction costs might reduce by 5%.
- Completion rate under the Pradhan Mantri Awas Yojana (PMAY) is only 35% in Andhra Pradesh.
- Handicrafts:
- GST reduced from 12% to 5%.
- Supports traditional artisan communities, like those producing Kondapalli toys, Etikoppaka toys, and Mangalagiri sarees.
- Scheme of Fund for Regeneration of Traditional Industries (SFURTI) supports artisans, but its continuation is pending approval.
- Agriculture:
- GST on farm machinery reduced from 12% to 5%.
- Key fertilizer inputs like sulphuric acid, nitric acid, and ammonia reduced from 18% to 5%.
- Agri Infrastructure Fund has utilized only ₹66,000 crore of the allocated ₹1 lakh crore.
Conclusion: A synergistic approach, combining macro-level tax policy changes with effective on-ground implementation, is essential for maximizing the benefits of these reforms.
