Lok Sabha Question No. 136 (STARRED), answered on 2026-02-09
Subject: Multi-Layered Tax Structure
Ministry: FINANCE
Asked by: Shri Bhausaheb Rajaram Wakchaure

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA STARRED QUESTION NO. †* 136

TO BE ANSWERED ON MONDAY, FEBRUARY 9, 2026/MAGHA 20, 1947 (SAKA)

## MULTI-LAYERED TAX STRUCTURE

†* 136.  SHRI  BHAUSAHEB RAJARAM WAKCHAURE:

Will the Minister of Finance be pleased to state:

- (a)  whether  the  Government  is  aware  that  due  to  the  excessively  high  and  multiple  taxes,  including income tax, surcharge, cess and GST in the country, the middle class, salaried employees and professional class are feeling economically exploited, if so, the details thereof;
- (b) whether the Government acknowledges that this multi-layered tax structure is seriously impacting the real income and savings of citizens, if so, the details thereof;
- (c) whether the Government agrees that if the current stringent tax policies are not reformed immediately, India will cease to be a tax-collecting nation and instead become a nation that loses its taxpayers, if so, the details thereof;
- (d) whether the Government has a clear roadmap for bringing about real and concrete reforms in income tax, cess, surcharge and GST in order to retain Indian citizens who are burdened by excessive taxation, if so, the details thereof;
- (e) whether this high and multiple taxation is compelling citizens to migrate abroad, especially to tax-free countries' and if so, the details thereof; and
- (f) the concrete steps taken by the Government to control the situation?

## ANSWER

## THE MINISTER OF FINANCE (SMT. NIRMALA SITHARAMAN)

- (a) to (f):     A statement is placed on the Table of the House.

****

## Statement referred to in reply to LOK SABHA Starred Question No. †* 136 for answer on  9 th   February,  2026  raised  by  SHRI  BHAUSAHEB  RAJARAM  WAKCHAURE regarding ' MULTILAYERED TAX STRUCTURE'

(a) to (c): No. Based on the budget documents of Union and State governments, the Tax to GDP ratio for the nation for the year 2025-26 is 18.4%. This is one of the lowest amongst comparable G20 developing economies.

(d):      The  Government has undertaken various reforms in both direct and indirect taxation for ease of living of citizens. Details in Annexure 'A'.

- (e):    No.

(f):   In view of (e) above, does not arise.

## With respect to Direct Taxes :

India does not have a multi-layered income-tax structure. The income-tax is levied, on the income earned, as  per  the  Income-tax  Act,  1961.  Further, surcharge and  cess  are levied  additionally  on  the amount  of income-tax. Other direct taxes like Wealth Tax, Gift Tax and Fringe Benefit Tax have been removed from the statute over a period of time.

Moreover, the Government has undertaken wide-ranging and continuous reforms over the past several years with the objectives of simplification, rationalisation, ease of compliance, reduction of litigation and promotion of voluntary tax compliance. Major reforms undertaken, inter alia, include the following:

## I. Reduction in tax rates & Simplification of direct tax laws

- (i) Corporate Tax: In order to promote growth and investment, the Government has brought in a historic  tax  reform  through  the  Taxation  Laws  (Amendment)  Act,  2019  which  provided  a concessional tax regime  of 22%  for  all existing domestic  companies.  In  line with the Government's stated policy of removing exemption/deductions, these reduced rates are applicable for only those companies which do not avail exemptions/deductions. These companies have also been exempted from Minimum Alternate Tax (MAT).

Further, as proposed in the Finance Bill, 2026, the MAT rates have been reduced to 14% and the same has also been proposed to be the final minimum alternate tax. It has also been proposed that the set-off of accumulated MAT credit will only be available to domestic companies who chose to exercise option for the new tax regime. This will help domestic companies to shift towards the new tax regime. This will also enable a simpler taxation framework for these companies where they get lower tax rates without exemptions/deductions.

- (ii) Reduction of rate of foreign companies to 35 per cent: The rate of income-tax chargeable on income of foreign company (other than that chargeable at special rates) has been reduced from 40% to 35% vide Finance (No. 2) Act, 2024.
- iii)  Personal Income Tax: In order to reform personal income-tax, Finance Act, 2020 has provided an option to individual taxpayers for paying income-tax at lower slab rates if they do not avail specified exemption and incentive. Apart from the above, Finance Act, 2020 has also provided an option to the co-operatives to pay taxes at concessional rates without claiming any specified deduction  or  incentive.    Finance  Act,  2025  has  provided  substantial  relief  under  the  new  tax regime with new slabs and reduced tax rates.
- (iv)      Increase  in  rebate  in  new  tax  regime: Finance  Bill,  2025  has  increased  the  rebate  for  the resident individual under the new regime so that they do not pay tax if their total income is up to Rs. 12,00,000. Marginal relief as provided earlier under the new tax regime is also applicable for income marginally higher than Rs. 12,00,000.

For  salaried  individuals,  standard  reduction  of  Rs  75000  is  available.  Therefore,  salaried individuals do not pay tax if their gross total income is up to Rs 12,75,000.

- (v)  Abolition  of  Dividend  Distribution Tax (DDT): In  order  to  increase  the  attractiveness  of  the Indian Equity Market and to provide relief to a large class of investors in whose case dividend income is taxable at the rate lower than  the  rate  of  DDT,  the  Finance  Act,  2020  removed  the Dividend Distribution  Tax  under  which the  companies  shall  not  be  required  to  pay  DDT  with effect from 01.04.2020. The dividend income would be taxed only in the hands of the recipients at their applicable rate.
- (vi)  Incentives  for  Start-ups: In  order  to  incentivize  start-ups  in  the  country,  the  eligibility  for claiming tax holiday for start-ups was extended for start-ups incorporated -till 31 st March, 2025 by  the  Finance  Act,  2024.  Further,  in  order  to  incentivize  funding  of  the  start-ups,  the  capital gains exemption for investment in start-ups was also extended by one more year till 31 st  March, 2022 vide Finance Act, 2021. The threshold limit for eligible start-ups was earlier raised to Rs 100 crores from Rs 25 crores. Finance Act, 2023, had further provided that carried forward loss of  eligible  start-ups  shall  be  considered  for  set  off,  if  such  loss  has  been  incurred  during  the period of ten years beginning from the year in which such company was incorporated. Further, The Finance Act, 2025 has been amended to extend the benefit provided under section 80-IAC to startups  for  another  period  of  five  years,  i.e.  the  benefit  will  be  available  to  eligible  start-ups incorporated before 01.04.2030.

## Ease of Compliance for Taxpayers

- (i) Simplification and rationalisation of capital gains taxation regime: The period of holding of capital  assets  has  been  simplified  with  amended  provisions  providing  for  a  period  of  12/24 months  as  holding  period  for  capital  assets.  The  rate  of  tax  on  short  term  capital  gains  under section 111A of the Act has been increased from 15% to 20% for STT paid listed equity shares, units of equity-oriented funds and business trusts. The rate for long term capital gains on above capital assets has been rationalised from 10% to 12.5%. Rate of taxation in respect of other long term capital assets has been rationalised and simplified to 12.5% without indexation from earlier rate  of  20%  with  indexation,  with  an  option  being  provided  to  opt  for  a  beneficial  regime  in respect  of  immovable  property  acquired  before  the  23rd  July,  2024.  This  option  has  been provided to resident Individuals/HUFs.
- (ii) Rationalisation  of  certain  TDS  rates: To  improve  ease  of  doing  business  and  encourage voluntary  compliance  by  taxpayers,  certain  Tax  Deduction  at  Source  (TDS)  rates  have  been reduced from 5% to 2% vide Finance (No. 2) Act, 2024. These include sections 194D (Payment of  insurance  commission  (in  case  of  person  other  than  company)  (with  effect  from  1.4.2025), 194DA (Payment in respect of life insurance policy), 194G (Commission etc on sale of lottery tickets),  194H  (Payment  of  commission  or  brokerage),  194-IB  (Payment  of  rent  by  certain individuals or HUF), 194M (Payment of certain sums by certain individuals or Hindu undivided family).  Rate  of  TDS  u/s  194-O  (Payment  of  certain  sums  by  e-commerce  operator  to  ecommerce  participant)  has  been  reduced  to  0.1%.  Further,  section  194F  of  the  Act  has  been omitted pertaining to payments on account of repurchase of units by Mutual Fund or Unit Trust of India. Further, section 206C(1H) of the Act has been made non-applicable.
- (iii) Charitable  trusts/  Institutions: Amendments have been made to merge the two schemes for exemption  and  also  provide  for  rationalisation  of  filing  of  applications  and  the  timelines  for registration  and  approval  of  certain  benefits  to  charitable  trusts  and  institutions.  Further, Amendments have been made to amend the period of validity of registration of trust or institution from 5 years to 10 years for smaller trusts or institutions. The definition of specified violation for cancellation of registration of trust or institution has been rationalised so as to not apply the same for  minor  default  as  in-complete  applications.  Further,  the  definition  of  persons  making substantial contribution to a trust or institution for denial of exemption has also been rationalized.
- (iv) Faceless  Assessment: The  e-Assessment  Scheme,  2019  notified  on  12th  September,  2019 provides for a new mechanism for making assessment by eliminating the interface between the Assessing Officer and the assessee, optimizing use of resources through functional specialization and  introducing  the  team-based  assessment.  Further,  the  said  scheme  was  later  renamed  as Faceless Assessment Scheme, 2019.Vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), the said scheme was incorporated in to Income-tax Act by inserting section 144B.
- (v) Faceless Appeals: In order take the reforms to the next level and to eliminate human interface, the Finance Act,2020 empowered the Central Government to notify Faceless appeal Scheme to eliminate human interface in the appellate function of the department between the appellant and the Commissioner of Income-tax (Appeals). The Faceless Appeal Scheme, 2020 was notified on 25.09.2020  and  later  amended  as  Faceless  Appeal  Scheme,  2021  which  was  notified  on 28.12.2021.
- (vi) New  Form  26AS: New  Form-26AS  has  already  been  notified.  This  new  form  contains  all information  of  deduction  or  collection  of  tax  at  source,  specified  financial  transaction,  and payment of taxes, demand and refund, pending and completed proceedings.
- (vii) Pre-filling of Income-tax Returns: In order to make tax compliance more convenient, pre-filled Income tax Returns (ITR) have been provided to individual taxpayers.  The ITR form now contains pre-filled details of certain incomes such as salary income.
- (viii) Increasing threshold limits for presumptive taxation schemes: Finance Act, 2023 has  increased  the  threshold  limits  for  availing  the  presumptive  scheme  of  taxation  subject  to certain conditions.  In case of small enterprises, whose cash receipts are no more than 5 per cent, the threshold limit to avail presumptive scheme has been to be increased from Rs 2 crore to Rs 3 crore. In case of professionals whose cash receipts are no more than 5 per cent, the said limit has been increased from Rs 50 lakh to Rs 75 lakh.

## III. Reduction in Litigation:

- (i) Updated Return :  To  increase  ease  of  voluntary  compliance  and  reduce  litigation,  a  new  subsection (8A) is inserted in section 139, facilitating the taxpayer to be able to update his return anytime within two years from the end of the relevant assessment year. A taxpayer can file an updated return by voluntarily admitting omissions or mistakes and paying an additional tax as applicable. Section 140B was inserted in the Act to make provisions for paying an additional tax above the normal tax applicable for additional incomes as reflected in the updated return. Further, the  time-limit  to  file  the  updated  return  has  been  extended  from  the  existing  24  months  to  48 months from the end of the relevant assessment year.

## With respect to Indirect Taxes :

## 1. Reforms in GST (GST 2.0)

In the 56th meeting of the GST Council held on 3rd September, 2025, the Council approved reforms with a multi-sectoral and multi-thematic focus on improving the lives of all citizens and ensuring ease of doing business for all, including small traders and businessmen.

## 1.1 GST Rate Rationalization:

1.1.1 GST Council has approved rate rationalization with a focus on Common man, Labourintensive industries, farmers and agriculture, health, the key drivers of the economy.

1.1.2 Rationalization of the current 4tiered tax rate structure into a citizen friendly 'Simple Tax' - a 2 rate structure with a Standard Rate of 18% and a Merit Rate of 5%; a special de-merit rate of 40% for a select few goods and services.

1.1.3 The changes in the GST rates have been notified vide Notification No. 9/2025-Central Tax  (Rate),  Notification  No.  10/2025-Central  Tax  (Rate),  Notification  No.  13/2025-Central  Tax (Rate)  and  Notification  14/2025-Central  Tax  (Rate)  and  these  notifications  have  come  into  effect from  22nd  September,  2025.  The  new  distribution  of  items  across  GST  slabs  after  the  56th  GST Council meeting is thus as under:

- o NIL rate : Significantly expanded to cover essential food items (UHT milk, paneer, all Indian breads like chapati/roti/paratha), exercise books/notebooks, erasers, pencil sharpeners, maps, and 36 lifesaving drugs.
- o 5%  rate  (Merit  Rate) :  Vastly  expanded  to  include  common  man  items  (hair  oil,  soap, toothpaste, bicycles), most food items (packaged namkeens, pasta, noodles, chocolates, coffee, butter, ghee), agricultural goods (tractors, farming machinery), renewable energy devices, all drugs and medicines (reduced from 12%), textiles, handicrafts, footwear up to ₹2,500
- o 18%  (Standard  Rate) :  Now  includes  small  cars  and  motorcycles  ≤350cc,  TVs,  ACs, dishwashers, cement, buses, trucks, ambulances, auto parts, bidis, and most other goods
- o 40%  (Demerit  Rate) :  Limited  to  select  items  including  luxury  cars,  motorcycles  >350cc, yachts,  aircraft  for  personal  use,  tobacco  products  (except  bidis),  pan  masala,  aerated beverages, caffeinated beverage and similar demerit goods

This represents a major simplification with most goods now under either 5% or 18% rate, with the 12% slab being largely phased out and the 28% slab restructured to 40% for only the most demerit items.

1.1.4 The changes in the GST rates for services have been notified vide Notification No. 15/2025Central  Tax  (Rate),  Notification  No.  16/2025-Central  Tax  (Rate)  and Notification No.  17  /2025Central Tax (Rate) and these notifications have come into effect from 22nd September, 2025. Many servicers  were  shifted  from  12%  GST  slab  to  5%  slab,  18%  slab,  and  few  de-merit  services  were placed in the 40% slab such as:

o 5%  rate  (Merit  Rate) :  Expanded  to  include  services  availed  by  common  man  like  hotel accommodation,  services  with  room  tariff  up  to  ₹7,500/day, third -party  insurance of  goods carriage, cinematograph films where price of admission ticket is up to ₹100, job work services (for goods like pharmaceuticals, leather products etc.), and beauty/wellness services.

o 18% (Standard Rate): Post rate rationalisation, GST on several services has been revised from 12%  to  18%  with  ITC,  including  certain  works  contract  services;  services  of  air  transport  of passengers  in  other  than  economy  class;  professional,  technical  and  business  services  relating  to exploration,  mining  or  drilling  of  petroleum  crude  or  natural  gas  or  both;  support  services  to exploration,  mining  or  drilling  of  petroleum  crude  or  natural  gas  or  both  and  residual  job  work services not expressly covered elsewhere.

o 40% (Demerit Rate) : Very few services pertaining to casino, gambling, race club and specified actionable claims.

1.1.5 Further, full Exemption of GST on all individual life insurance policies whether term life, ULIP or endowment policies and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country. Exemption of GST on all individual health insurance policies (including family floater policies and policies for senior citizens) and reinsurance thereof to make insurance affordable for the common man and increase the insurance coverage in the country.

## 2. Recent Measures for Simplification and Ease of Compliance (GST):

- Simplified  GST  Registration  Scheme  for  Small  and  Low-Risk  Businesses: The  GST Council in its 56th meeting has recommended a simplified GST Registration Scheme for Small and Low-Risk Businesses wherein registration shall be granted on an automated basis within three working days from the date of submission of application in case of low-risk applicants and applicants who based on their own assessment, determine that their output tax liability on sup plies to registered persons will not exceed Rs. 2.5 lakh per month (inclusive of CGST, SG ST/UTGST and IGST). The scheme provides for voluntary opting into and withdrawal from the scheme. This benefits around 96% of new applicants applying for GST registration. This has been operationalized from 1 November, 2025 and is reported to be working smoothly..
- Introduction  of  Simplified  Registration  Scheme  for  small  suppliers  supplying  through electronic commerce operators: The Council has also approved in-principle, the concept of a simplified  GST  registration  mechanism  for  small  suppliers  making  supplies  through  ecommerce operators (ECOs) across multiple States facing challenges in maintaining principal place  of  business  in  each  State  as  currently  required  under  the  GST  framework.  It  will  ease compliance for such suppliers and facilitate their participation in e-commerce across States.
- Sanction of risk-based provisional refund to facilitate refund claims on account of zerorated  supply  of  goods  or  services  or  both  (i.e.  export  of  goods  or  services  or  both    or supply to a Special Economic Zone developer/unit for authorised operations: Amendment has been made in rule 91(2) of CGST Rules, 2017 to provide for sanction of 90% of refund claimed as provisional refund by the proper officer on the basis of identification and evaluation of risk by the system.
- Proposal  for  Risk-Based  Provisional  Sanction  of  refunds  arising  out  of  inverted  duty structure (IDS): The Council has also recommended amending section 54(6) of the CGST Act, 2017, to provide for sanction of 90% of refund claimed on provisional basis, in cases arising out of inverted duty structure, on similar lines as is presently available for refund in respect of zero-rated supply.
- Amendment in CGST Act to  provide  for  GST  Refunds  in  respect  of  low  value  export consignments: The  Council  has  further  recommended  amendment  to  section  54(14)  of  the CGST Act, 2017 so as to remove the threshold limit for refunds arising out of exports made with  payment  of  tax.    This  will  particularly  help  small  exporters  making  exports  through courier, postal mode etc.
- Amendment in place of supply provisions for intermediary services under section 13(8) of the IGST Act: The Council recommended omission of clause (b) of section 13(8) of IGST Act 2017.  Accordingly,  after  the  said  law  amendment,  the  place  of  supply  for  'intermediary services' will be determined as per the default provision under section 13(2) of the IGST Act, 2017  i.e.  the  location  of  the  recipient  of  such  services.  This  helps  Indian  exporters  of  such services to claim export benefits.

## 3. Recent Measures for Simplification and Ease of Compliance (CUSTOMS):

- Central Repository for Non-Tariff Measures (NTMs)CBIC created a centralized  system using  UNCTAD  methodology  to  map  NTMs  issued  by  PGAs.  481  NTMs  with  Control Numbers are published on the Compliance Information Portal for trade reference and ease of understading for the trade.
- Hub  &  Spoke  Model  for  E-commerce  ExportsA  transformative  postal  export  model launched with DoP, leveraging 1.54 lakh post offices. Legal backing provided via Postal Bill of Export Regulations (Dec 2022). Supported by FTP 2023 to empower MSMEs.
- Electronic  Certificates  of  Origin  (e-CoO)This  is  to  reduce  the  compliance  cost,  enhence security and improve the transparency in the trade process.
- ICETAB  2. 0 LaunchRevamped  smart  tablets  (ICETAB  2.0)  launched  to  enhance  field operations for faster  customs clearance process and improve India's Ease of Doing Business ranking.
- Faster Duty Drawback DisbursalOnline PFMS-based payment system introduced in June 2024 for faster, paperless, and automated duty drawback disbursal.
- Exchange Rate Automation Module (ERAM)Automated exchange rate publishing system launched in July 2024, replacing manual processes and improving transparency for importers/exporters.
- Auto  Let  Export  Order  under  ECCS  Auto  LEO  enabled  for  courier  shipping  bills  not flagged by RMS, streamlining express cargo clearance.
- Electronic Cash Ledger (ECL)Phased implementation of ECL from April 2023 allows trade users to deposit funds digitally for customs duty payments via ICEGATE.
- Gender-Inclusive Infrastructure Circular issued in March 2024 mandates safe and inclusive facilities for women at logistics hubs (CFS/AFS/ICD), promoting Nari Shakti.
- Export  Benefits  via  Courier  ModeFrom  Sept  2024,  CBIC  extended  Duty  Drawback, RoDTEP, and RoSCTL benefits to courier-mode exports, boosting e-commerce.
- Revamping of National Assessment Centres (NACs) -NACs in faceless assessment process have been restructured from 11 to 8 for better specialization and uniform assessments.
- Automation  of  Customs  RefundRefund  process  digitized via  ICEGATE  for  faster, transparent, and paperless disbursal.
- Electronic Bond & e-BG FacilitySingle electronic bond (SEB) introduced to replace multiple physical bonds at ports to reduce the compliance burdern of the trade.
- VEGA FrameworkVEGA enables faster cargo clearance through on-arrival movement and importer-premises examination.
- Provisional Assessment RegulationCustoms  (Finalisation of Provisional Assessment) Regulations,  2025  was  issued  in  Sep  2025  defining  clear  time  lines  for  finalization  of provisional assessment, to reduce the blockage of working capital, increase predictability and faster refund for trade.
- IFSC  Code  Auto-Approval  ReformCBIC's  introduced  a  system -based auto-approval mechanism for IFSC code registration of incentive-linked bank accounts. Under this reform, once an exporter's IEC and bank accountIFSC combination is approved at any one customs location, it is automatically validated across all customs ports in India, eliminating the earlier requirement  of  port-wise  manual  approvals.  This  reform  significantly  benefits  exporters  by enabling  faster  credit  of  IGST  refunds  and  duty  drawbacks,  improving  efficiency  and transparency  through  ICEGATE,  and  easing  compliance  for  exporters  operating  through multiple ports.
- Regulation for Revision of Entries Post Clearance (Section 18A, Customs Act, 1962)The introduction of regulations under Section 18A of the Customs Act, 1962 establishes a structured and  electronic  mechanism  for  revising  entries  in  Bills  of  Entry  and  Shipping  Bills  after clearance  of  goods.  The  reform  enables  importers  and  exporters  to  digitally  request  postclearance corrections in areas such as classification, valuation, and quantity, with system-based validation and uniform procedures across all customs formations.