Streamlined GST: A New Frontier for India's Fiscal Future
The proposed 2-tier GST structure, featuring just two slabs of 5% and 18%, aims to simplify the taxation system in India. Expected to enhance fiscal revenues and reduce classification disputes, this reform is under discussion by the Centre and states, highlighting potential boosts in consumption and economic clarity.
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- India
The Indian government's proposal to streamline its Goods and Services Tax (GST) structure to a two-tier system is gaining attention. According to S&P Global Ratings Director YeeFarn Phua, this reform could lower the effective taxation rate while boosting fiscal revenues in the long run.
Currently, GST incorporates four different tax slabs, making the system complex and difficult to implement. By proposing a reduction to two slabs—5% and 18%, and adding a special 40% rate for select items—the government aims to simplify the tax regime. This proposal will be discussed in a critical meeting between the Centre and state governments.
Phua emphasized that the shift is unlikely to negatively impact fiscal revenues. Instead, a clearer and more straightforward tax structure could enhance short-term consumption spending and diminish disputes and litigation, providing a more robust economic framework.
(With inputs from agencies.)
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