Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal has confirmed that the central government will not reduce GST rates on sin goods such as tobacco, liquor and luxury items. Speaking at an event, he said that these items would continue to attract high taxation, with levies beyond 40% permissible under constitutional provisions.
Looking ahead, Agarwal suggested that India may eventually move towards a single GST rate structure, eliminating the 5% merit rate and retaining one standard rate. Such a reform, he explained, would simplify the tax system, remove inverted duty structures and address criticisms of GST complexity. However, this shift depends on achieving income parity across the population, which could take several years.
Highlighting the robust performance of the GST regime, Agarwal said that collections in the previous financial year stood at Rs 22 lakh crore, making it the right time to consider rationalization. He estimated that past rate cuts had a revenue impact of around Rs 48,000 crore, but stressed that any reductions must translate into lower consumer prices to boost demand.
On the issue of compensation cess, Agarwal clarified that it was originally introduced to offset states' revenue losses for five years ending June 2022. Since then, cess collections are being used only to repay loans, with certain categories like automobiles and coal already discontinued.
Addressing anti-profiteering concerns, the CBIC Chairman reassured that existing GST provisions and ongoing price monitoring mechanisms are sufficient to ensure that benefits from any rate cuts are passed on to end consumers. He added that earlier rate reductions did not see significant profiteering complaints, boosting confidence in the system's safeguards.
With the debate on GST reform continuing, Agarwal's comments underline the government's cautious but forward-looking approach-balancing fiscal stability with the long-term goal of a simpler, unified tax regime.
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