Mint Quick Edit | GST 2.0: Reform at long last

5 months ago 9

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The government reportedly has a two-slab GST rate structure in mind for the most part. (ANI)

Summary

Prime Minister Narendra Modi's announcement of ‘next-generation’ reforms for the goods and services tax (GST) is welcome. With India's GST mop-up having stabilized, the reforms can focus on enriching the economy rather than filling state coffers.

Prime Minister Narendra Modi has set the stage for a transformative rejig of India’s goods and services tax (GST) regime by Diwali. “We have discussed with states and we are bringing next-generation GST reforms that will reduce the tax burden," he said in his Independence Day speech on 15 August.

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The government reportedly has a two-slab GST rate structure in mind for the most part: items would be taxed at either 5% or 18%, with a 40% rate applicable to a handful of luxury and so-called sin goods. If this eases the bulk burden, it could stimulate consumption.

Along with refunds being processed faster and inverted duty structures being fixed, easily done by easing GST on inputs, the shift could yield significant gains for the economy.

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Thankfully, India’s GST mop-up has stabilized, enabling the Centre to rely less on this indirect tax. With cesses on their way out, opposition-run states have no reason to carp at the GST Council.

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Perhaps a broad new bargain could draw energy, liquor and other left-out items into the GST net, thus giving the slogan of “One nation, one tax" added meaning. In general, our tax policy must go by what’s best for the economy and not what fills state coffers.

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