India PM Modi vows October cuts to goods and services tax
"This Diwali, I am going to make it a double Diwali for you. Over the past eight years, we have undertaken a major reform in goods and services tax. We are bringing next-generation GST reforms that will reduce the tax burden across the country," he said during a speech to mark the country's anniversary of independence.
Modi's announcement comes as India moves to simplify its GST structure, with a group of ministers preparing a report that will consider merging tax slabs and lowering rates on some products.
The government has previously said that it wants to change GST rates and reduce the number of brackets, referring to tax rates for different categories, under a tax regime introduced in 2017.
The country currently levies GST at 5%, 12%, 18% and 28% on most goods and services, excluding gold and silver, and applies an additional levy on so-called demerit items such as cigarettes and high-end cars.
Citi estimated that about 20% of items - including packaged food and beverages, apparel and hotel accommodation - fall under the 12% GST slab, accounting for 5-10% of consumption and 5-6% of GST revenue.
If most of these are moved to the 5% slab and some to the 18% slab, it could lead to a revenue loss of around 500 billion rupees, or 0.15% of GDP, potentially taking the total policy stimulus for households in the current 2025-26 financial year to 0.6%-0.7% of GDP, the brokerage said.
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