On July 1, 2017, the Indian government took a huge step forward by introducing Goods and Services Tax (GST), replacing a fragmented tax system with a unified one. Since then, the government has focused on improving GST efficiency to boost India's economic growth. The key challenge now is sustaining this positive momentum.
Union finance minister Nirmala Sitharaman has advocated for tax simplification and tech-enabled reforms. In September, she highlighted efforts to streamline litigation with the setting of GST Appellate Tribunal and using artificial intelligence (AI) to enhance the tax system and ease of doing business.
Towards simplification and ease of doing business
In this context, it will be pertinent to analyse the recent recommendation of the Group of Ministers (GoM) on GST rate rationalisation.
Take the case of the proposal to introduce a new fifth GST slab of 35% for products like aerated beverages and tobacco, which may boost revenue but could also impact livelihoods and fuel illicit trade.
It would be useful to analyse the aerated beverages industry, which is constrained by a tax structure that hinders growth, innovation, and employment potential. India has one of the highest tax rates for carbonated soft drinks (CSDs), while over 90% of countries taxing sugar-sweetened beverages (SSBs) have much lower rates. Moreover, the high tax burden is applied regardless of sugar content, while the World Health Organization (WHO) and World Bank recommend fiscal measures to incentivise healthier product formulations, including layered taxation based on sugar content.
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