India Cuts GST Levies, Simplifies Rules Ahead of Federal Budget

(Bloomberg) -- India slashed tax rates on some goods and services just days ahead of the country’s budget, as it continues to rationalize its six-month-old regime to ease the pain for businesses hit by its chaotic roll out.

A panel of federal and state finance ministers on Thursday decided to revise GST rates on 29 goods and 53 services, Finance Minister Arun Jaitley told reporters after a meeting of the GST council. The council recommended reducing rates on diamond and precious stones to 0.25 percent from 3 percent, while the rate on 20-liter bottle of packaged drinking water fell to 12 percent from 18 percent, according to a government statement.  

The rate cuts may lead to a revenue loss of 10 billion rupees ($156.6 million) to 12 billion rupees, an Indian official said separately, asking not to be identified citing rules. The adjustments are the latest in a series of tweaks the government has made to the GST.

The council recommended reducing rates on old used motor vehicles and buses using bio fuels to 18 percent from 28 percent, while sugar-boiled confectionery and fertilizer grade phosphoric acid dropped to 12 percent from 18 percent. Rates on scientific and technical instruments and liquefied petroleum gas for households fell to 5 percent from 18 percent.

A 5 percent tax was imposed on rice bran, while the rate on cigarette filters was increased to 18 percent from 12 percent, it decided.

The council will consider including new items into the goods and services tax fold -- including gasoline and real estate -- at the next meeting, Jaitley said. And given the onerous GST return filing procedure, the council is working on simplifying the process. The council is expected to meet again before the end of the month. 

Prime Minister Narendra Modi’s administration has made several changes to the national sales tax launched in July, after disruptions to businesses and supply chains threatened to erode its effectiveness in converting the country into one of world’s biggest markets. On Feb. 1, the government is set present the budget, outlining its economic road map for the financial year starting April 1.

Apart from boosting the price of some items, taxpayers adapting to the GST have also faced issues with electronic filing of returns, forcing the government to extend deadlines and make one tweak after another.

--With assistance from Pratik Parija

To contact the reporters on this story: Shruti Srivastava in New Delhi at ssrivastav74@bloomberg.net, Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net.

To contact the editors responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Unni Krishnan

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