The goods and services tax in India will benefit the lower and lower-middle income class as it is likely to reduce the tax rate on goods, a blog posted on Asian Development Bank’s website said. 

It will mitigate significantly the negative impact of goods and services tax (GST) on the “bottom half” of the population, said the blogpost written by Mukul Asher, Professorial Fellow, Lew Kuan Yew School of Public Policy. 

In general, GST is likely to reduce the tax rate on goods as compared to previously, while tax rates on services are expected to increase, the blog said. 

As households progress towards higher income brackets, the share of household budget spent on services increases and on goods declines. 

“So, the above overall trend would exhibit tendency towards lower burden for low and lower middle-income households, while the reverse is likely for upper middle income and high income households. 

“This would significantly mitigate the negative impact of the GST on the bottom half of the population,” reads the blog.