New Delhi: India’s measure to cut taxes on more than 50 products will reduce revenue by as much as Rs 15,000 crore ($ 2.2 billion) each year, according to people familiar with the matter. A panel of state and central finance ministers on Saturday reduced the tax on goods and services on articles of washing machines and lithium-ion batteries to deities sculpted in stone and sanitary napkins while Prime Minister Narendra Modi seeks to increase sentiment and growth before facing -election next year.
The loss of revenue will be minimal, interim Finance Minister Piyush Goyal told reporters at a subsequent briefing in New Delhi without giving further details.
However, officials who did not want to be identified as they are not authorized to speak with the media, shared a figure equivalent to 1% of the tax budgeted for the federal government. The administration can not afford to lose revenue because rising oil prices threaten to widen India’s fiscal deficit and increase the costs of global debt.
The new GST rates come into effect on July 27 and the panel will meet again on August 4 to discuss the problems faced by small businesses. The spokesman of the Ministry of Finance, DS Malik, did not respond to a phone call outside of business hours on Sunday.
Concerns about income
India’s GST is just over a year old and the panel has already revised rates several times. The latest reduction comes before the elections later this year in the states of Madhya Pradesh and Rajasthan, both governed by the Bharatiya Janata Party (BJP) of Modi. The tax cuts on the last occasions approached the date of some state surveys, which gave more strength to the arguments that were made to obtain electoral gains.
Modi needs resources to increase social spending before the 2019 general election. Monthly GST receipts have increased after the initial problems, but are not yet strong enough to meet the government’s annual fiscal target of approximately 15 billion. of rupees.
GST, touted as one of the major Modi government reforms, replaced a large number of liens with a sales tax nationwide. Its introduction was marred by technical problems and commercial disruptions.