GST Rate Slabs To Be Reduced To Three In Coming Months

(Bloomberg) --

India is working on simplifying the country’s sales tax regime by introducing three slabs instead of the existing four rates, a top tax official said. 

“Too many rates in goods and services tax are leading to classification disputes and that needs to be resolved,” Sanjay Agarwal, chairman of the Central Board of Indirect Taxes and Customs said in an interview Wednesday. 

Agarwal said GST compliance has improved since the tax was introduced in July 2017 and revenue growth has stabilized. That gives the government room to review the rates to simplify the system, he said.

Revenue from GST has been steadily rising over the years and increased 11.7% in the fiscal year through March 2024. The collections rose to 1.74 trillion rupees in June.

Agarwal said the government intends to simplify the GST structure by taking the existing slabs of 5%, 12%, 18% and 28% and combining it into three rates. The new rates would not impact the revenue collection adversely and the entire exercise “will be done in next few months.”

On Tuesday, the government also announced a reduction in the import duty on gold to boost jobs and exports in gems and finished jewelery products. 

“High duty was leading to smuggling,” Agarwal said, adding that in 2023-24, the department had seized 4.8 tons of gold worth close to 2.9 billion rupees. The tax was imposed when the current account deficit was high, but since it’s manageable now, the government has reduced it to boost the sector, he said.

In reference to the 28% GST levied on online gaming last year, Agarwal said the government has collected over 130 billion rupees from the companies since Oct. 2023.

--With assistance from Swati Gupta.

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