Don’t complicate GST by introducing new levies
GST,
the most radical tax reform post-independence, is still stabilising, which is not unexpected given the magnitude of changes that it brought about.
The primary goal of ease of doing business is yet to be accomplished. The new tax regime requires technology infrastructure to manage the massive scale of compliances, adding to the woes of taxpayers. However, there are good reasons to be optimistic. The government has proposed to simplify GST-related compliance and reporting requirements.
The government should now focus on simplification of tax-related processes, stabilising the technology infrastructure and removing ambiguity about widely debated tax issues.
To achieve this, a proactive approach is required for expanding the tax base by including petroleum products, alcohol and immoveable property within the ambit of GST. The decision to keep these goods outside the GST net is incompatible with the principal idea behind the GST -- to have a single tax on all goods and services resulting in freeflowing credit.
Having four rate structure i.e. 5 per cent, 12 per cent, 18 per cent and 28 per cent for goods and services though may have been a practical compulsion, it is not in consonance with the goal of having ‘one nation one tax’. So, the next step should be towards pruning the tax rates further by clubbing the rate of 12 per cent and 18 per cent to, say 15 or 16 per cent. The tax rate for luxury goods can also be revisited to bring them down to 20-22 per cent. Items like cameras, cement and paints, which are currently under the 28 per cent category, should be taxed at only 18 per cent.
It is also important that the structure is not made more complicated by introduction of new levies like sugar cess, which is currently being talked about.
There has to be more focus on tax administration. Strengthening the advance ruling mechanism, streamlining the process of issuance of notifications and greater integration between direct and indirect tax administration are aspects that need attention.
It’s now time to consolidate and let the regime stabilise, while continuing to explore structural changes. There is hope that GST 2.0, which is at the works currently, will be a much improved version compared to the first one.
The next step should be pruning of the tax rates further by clubbing few rates