In my last column (Business Standard, September 12, 2024), I argued for initiating second-generation reforms in the Goods and Services Tax (GST) system to make it simpler, more transparent, and less cascading. Reforms are necessary to make the consumption tax system more comprehensive, less distortionary, and export competitive.
Enhancing the revenue productivity of the tax system and reducing cascading in the consumption tax is important to achieve the aspirational goal of reaching the developed country status by 2047. Tax reforms tend to be more successful when the economy is on the upswing, as the risk of revenue loss is lower. The three important suggestions made are (i) restrict the exemption list to perishables and necessities; (ii) reduce the number of tax rates to two, with a third rate reserved for sumptuary or "sin" goods, without sacrificing revenues, and (iii) extend GST to currently excluded items -- namely, petroleum products, electricity, and real estate to make the self-enforcing system more comprehensive.
Admittedly, it is difficult to carry out the "Big Bang" reforms in tax policy in India. Therefore, what is sought is a directional change toward achieving a simpler and more efficient consumption tax system. There is a general principle in public choice theory that the larger the number of coalition partners, the more difficult it is to make decisions due to multiple preferred choices. Naturally, with the Union government and all the states and Union Territories (with legislatures) being a part of the GST Council's decision-making process, it is not easy to implement game-changing reforms. However, if the required directional change is clear, gradualism can work towards achieving what is desired eventually.
Unfortunately, what has been done so far is merely tinkering with the system without clear directional changes toward greater simplicity, transparency, and minimising the costs of collection, compliance, and distortions.
هذه القصة مأخوذة من طبعة October 10, 2024 من Business Standard.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة October 10, 2024 من Business Standard.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
Airbus says deliveries fell 9% in September
Airbus deliveries fell 9 per cent in September to 50 aircraft, compared with the same month last year, the European planemaker said on Wednesday.
Amazon targets faster deliveries with new tech
Amazon, in its quest for greater efficiency, has developed new systems to shave seconds off each package delivery and to help customers make faster buying choices, even for new product types that they may know little about.
Boeing revokes pay offer as strike drags on
Talks between Boeing and its key manufacturing union broke down, and no negotiations are currently planned as the financially damaging strike heads into a fourth week.
Netanyahu speaks to Biden as Israel's Iran retaliation looms
Israeli Prime Minister Benjamin Netanyahu's office said he spoke with US President Joe Biden for the first time in more than a month as Washington looks to temper Israel's retaliation for last week's missile attack from Iran.
Google faces breakup in historic antitrust case
Firm says it would have significant consequences for consumers, businesses
Soon, pay up to ₹1K without entering PIN on UPI Lite
The Reserve Bank of India (RBI) on Wednesday enhanced transaction limits for UPI123Pay and UPI Lite to encourage wider adoption of these UPI products.
BUYERS' BET Consumer confidence improves in RBI's September survey
Consumer confidence improved in the September 2024 Survey round compared to the previous round in July due to better perceptions about the general economic, employment, and income conditions, according to the Reserve Bank of India's (RBI) forward looking survey.
Hopes dashed but prudent approach, say realtors
Even as the realtors' hopes for a repo rate cut ahead of the festive season were dashed after the Reserve Bank of India (RBI) kept it unchanged at 6.5 per cent for the 10th consecutive time on Wednesday, real estate industry experts say that the decision represents a \"prudent approach\" expected to boost stability in the sector.
RBI opens door for rate cut, finally
If we see higher inflation in Sep-Oct and 7% GDP growth in Sep qtr, will the RBI go for a rate cut in Dec? Or, will that be pushed to Feb?
Micro, small enterprises not to face pre-pay fines
The Reserve Bank of India (RBI) on Wednesday said that banks and non-banking financial companies cannot levy foreclosure charges or pre-payment penalties on floating rate term loans sanctioned to Micro and Small Enterprises (MSEs).