India May Consider Higher Consumption Tax and Fewer Rates

(Bloomberg) -- India may look at increasing tax on some goods and services in a step toward moving to a simpler structure with fewer rates, according to people familiar with the matter.

A panel on goods and services tax, headed by Finance Minister Nirmala Sitharaman, will likely meet in December to consider the overhaul from the current four-rate system, the people said, asking not to be identified as the discussions are private. 

India currently taxes good and services produced in the country at 5%, 12%, 18% and 28%, with some essentials such as food items attracting the lowest rate and sin and luxury goods ending up with the highest levy.

The two lowest rates could be raised by a percentage point each to 6% and 13%, respectively, the people said. While the rates would eventually be pared to three as part of a phased reduction plan, a group of state finance ministers is expected to submit proposals by the end of next month, they said.

A finance ministry spokesman didn’t immediately respond to a call seeking comments. 

The plan to raise GST rates comes at a time when key Indian states are heading for polls early next year, possibly making it an unpopular move in a nation only just recovering from the devastation caused by the coronavirus pandemic.

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