The government indicated on Saturday that it may reduce goods and services tax rates in the coming months as collections are expected to top the budgeted estimate by Rs 1 lakh crore.
“If revenues increase, the government will want to pass on the benefit to consumers.Higher revenues will result in a lower fiscal deficit, more investment in infrastructure and create elbow room to cut rates,” Piyush Goyal, who is officiating as finance minister, said.
He said with the system stabilising, GST is helping boost growth as multiple taxes and cesses have been removed and collections this year could reach Rs 13 lakh crore, compared to the estimated mop-up of around Rs 12 lakh crore for the full financial year. “Once data from e-way bills comes, there will be some improvement and scope for some relief,” he added.
Since its launch last July, the government has lowered rates on around 320 items, a majority of which are in the top slab of 28% with a decision on reduction in levies on construction material such as cement and paints expected soon.
With collections showing signs of improvement, there is expectation of a fresh round of cuts before next year’s general elections.
Earlier, Arun Jaitley had talked about the possibility of a further rate reduction if tax collections remain buoyant. Recently, chief economic adviser Arvind Subramanian also talked about removing the 28% slab while simplifying the compensation cesses on luxury and sin goods such as cars, tobacco and soft drinks by making them uniform.