India PM Modi vows to lower goods and services tax by Diwali in Independence Day speech
"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 India's 79th Independence Day.
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 per cent, 12 per cent, 18 per cent and 28 per cent 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 per cent of items — including packaged food and beverages, apparel and hotel accommodation — fall under the 12 per cent GST slab, accounting for 5-10 per cent of consumption and 5-6 per cent of GST revenue.
If most of these are moved to the 5 per cent slab and some to the 18 per cent slab, it could lead to a revenue loss of around 500 billion rupees, or 0.15 per cent of GDP, potentially taking the total policy stimulus for households in the current 2025-26 financial year to 0.6 per cent-0.7 per cent of GDP, the brokerage said.
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