Drywall joint/edge against pipe ok?

I’m wrapping up the design of my basement ceiling. Going with drywall to save an inch or so.

One problem area I have is right at the bottom step to the basement there is a heating pipe that cuts diagonally across the ceiling. If I were to add a soffit there, I’d drastically reduce the ceiling height for entering the basement.

Is it OK for me to cut an angled drywall piece against both sides of the pipe to essentially have the pipe in between two drywall pieces. The pipe is too close to the joists to fit the drywall above it. Unless I use 1/2 inch drywall and attach to joist. The rest of the basement ceiling will be 5/8 inch drywall.

Is it acceptable to create a soffit that’s essential a 2 by 2 on each side? Width of pipe is probable 2 inches maxi so I’d have about a 6-7 inch wide soffit but only 2 inches deep. Trying to accomplish the minimal soffit size given it’s at the bottom of a step and entrance to room.

The brown/black pipe is what’s in question. I will be relocating the light and smoke alarm.