India Plans Tax Reform Ahead of Festival
(MENAFN) India is preparing to implement a significant reduction in its consumption tax system by October, aligning the reform with Diwali, the festival of lights celebrated across the country.
Prime Minister Narendra Modi revealed the plan during his Independence Day address, positioning it as part of a wider overhaul of the nation's taxation system.
This will be the most extensive reform to India's tax framework since 2017.
The government intends to replace the current four-tier goods and services tax (GST) structure, which includes a top slab of 28%, with a more streamlined two-tier system featuring rates of 5% and 18%. This simplification aims to enhance efficiency and make the tax process more logical.
During his speech on Friday, Modi emphasized that the restructured GST would be implemented before Diwali, a time traditionally marked by increased consumer spending.
He also urged individual Indian states to approve the proposed “next-generation” GST reforms, according to a news agency.
An official from the Indian government informed a news outlet that the objective is to reduce the tax rate on 99% of goods currently falling under the 12% bracket to 5%.
This change is expected to lower prices for a wide range of everyday goods.
Additionally, some electronic products may also see price cuts, as their GST rate may drop from 18% to 12%.
In light of the United States’ plan to impose a 50% tariff on Indian imports starting August 27, the Indian administration sees a potential opportunity.
By stimulating local demand, manufacturers might be able to cushion the impact of declining exports.
Modi further encouraged citizens to prioritize purchasing domestically-made products as a patriotic economic move.
The reformed two-rate GST system is designed to fulfill dual goals: to simplify both tax rates and administrative procedures while making them more logical and user-friendly.
A media outlet, quoting sources within the government, reported that these changes are intended to modernize and streamline India's tax regime.
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