FX.co ★ India Maintains Fiscal Deficit at 4.4% Despite GST Rate Cut

India has reaffirmed its fiscal deficit target for the fiscal year 2025-26 at 4.4% of GDP, as announced by a senior finance ministry official to The Economic Times, despite potential revenue decreases resulting from recent reductions in Goods and Services Tax (GST) rates. In a separate statement, Sanjay Kumar Agarwal, Chief of the Central Board of Indirect Taxes and Customs, indicated that there might be a short-term dip in GST collections in the initial period after the rate reductions. However, he anticipates that the demand during the festive season will stimulate sales. Agarwal is optimistic that the revised GST rates and new tax computation system, effective from September 22, will be implemented efficiently and without any disruptions. Under this new system, the previous four-tier GST structure has been simplified into two primary rates: 5% and 18%. Additionally, a new 40% slab has been introduced for luxury and "sin" products, including cigarettes, pan masala, gutkha, and aerated beverages. Levies exceeding 40% have been eliminated, thereby lowering the effective tax load on medium-sized and large vehicles.