India on Friday announced a slew of changes to its new national goods and services tax (GST), as pressure mounted on New Delhi to ease businesses’ tax burden in the midst of an economic slowdown.
Indian Prime Minister Narendra Modi’s government launched a new national goods and services tax on July 1, its biggest tax overhaul in a generation, that was meant to unify the US$2 trillion economy into a single market, with four tax rates of 5, 12, 18 and 28 percent.
However, traders and businesspersons complained that the new process was too complex and increased the cost of doing business.
Economists agree that it has contributed to dragging on India’s growth, which hit a three-year low of 5.7 percent in the first quarter of the financial year.
The government, which is in the midst of elections in a couple of states — including Modi’s home state of Gujarat — in December, on Friday announced plans to slash rates on several items across all tax brackets, easing the burden on consumers and businesses.
The biggest pruning occurred in the highest tax bracket of 28 percent, New Delhi said, adding that it would slash rates on 177 of the more than 200 goods, including chocolate and shaving cream.
It also cut rates on goods across all other tax brackets, making several products cheaper — including salad dressing, fly ash, fishing net and dried fish — and exempting others from GST.
Pratik Jain, partner at consultancy PricewaterhouseCoopers, said the reducing the number of goods in the highest tax bracket of 28 percent was “a step in the right direction and is indicative of a policy shift ... to what is right for GST structure and consumers. It would be good if the 28 percent bracket is further pruned.”
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