India will tax most goods at below 18 per cent in a further simplification of the Goods and Services Tax, prime minister Narendra Modi said, aiming to shore up support among businesses that have struggled with the new system.
GST, India’s most biggest tax reform, sets rates from 28 per cent to 5 per cent on most items, replacing an array of federal and state duties.
Modi told a conference on Tuesday that the government was looking to simplify the tax that was launched last year and would reduce the number of items in the highest bracket to just luxury goods.
‘Today, we are approaching a stage where 99 per cent items can be brought under 18 per cent,’ Modi said in a speech at an event in Mumbai.
‘...We firmly believe that GST must be as simple as possible and we are also working constantly in that direction.’
Modi’s ruling Bharatiya Janata Party faces a tough national election next summer and it is looking to consolidate its voter base among the middle class and businesses.
Last week, the party lost three heartland states because of anger over weak farm prices and lack of jobs. Disruptions from the GST and a ban on high currency notes in November 2016 curtailed growth, manufacturing, services and consumer spending.
Modi said many developed economies had struggled to implement tax reforms.
‘In developed countries too, implementing even small tax reforms is not easy. Like I said earlier, before implementing GST, the number of registered enterprises was just 6.6 million, which has now increased to 12 million.’
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