GST Cuts at Risk of Delay as States Wrangle Over Revenue

Proposals could lead to a substantial revenue loss, said a statement issued by eight states

- Reuters

Prime Minister Narendra Modi's plans for sweeping tax cuts are at risk of facing a delay as states governed by key opposition parties have sought compensation for any revenue loss from the planned changes.

In a rare move, Modi used his Independence Day speech to announce sweeping goods and services tax (GST) cuts on household items and "aspirational" goods, calling it a Diwali gift ahead of the October festival.

Economists see the tax cuts as a way to balance the likely economic impact of punitive US tariffs on India.

The federal government's proposal of a two-rate tax structure of 5% and 18%, with some luxury and sin goods such as cigarettes taxed higher at 40%, has broadly been accepted by states, but they are now wrangling to protect revenues after the tax changes.