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Make GST ‘Good & Simple’

opinionEditorialMake GST ‘Good & Simple’

The Narendra Modi-led National Democratic Alliance government did well in recently slashing the items that attracted a 28% Goods & Services Tax rate. Certainly the move was welcomed across the country, including in the state that was soon to go to the polls, Gujarat. In this context, the Election Commission of India must have had weighty reasons for not clubbing together the poll date announcement of Himachal Pradesh and Gujarat, thereby giving an opportunity for the GST Council to meet and decide on a welcome reduction in the items attracting super high rates of tax. In order to clear the atmosphere of misapprehensions and unfortunate claims of lack of neutrality on the part of the ECI (claims that ought not to have been made so carelessly), the commission needs to clarify the reasons why it was forced to separate the poll dates announcements of Himachal Pradesh and Gujarat. Transparency has been sought ceaselessly by Prime Minister Modi, who has been working at his usual brisk pace to ensure the spread of digital system such that human error and bias get eliminated in decision making, and the ECI should draw a lesson from this and be more transparent about its reasoning and indeed its entire functioning, including why it takes so much longer to announce results despite EVMs than is the case in countries that use paper ballots which have laboriously to get counted ballot by ballot. In an age of lightning fast technology, it is inexcusable that the public has often to wait for days and sometimes weeks to learn the results of elections that have taken place. These should be announced within a few hours of the close of counting, in view of the superior technology that has been used in the machines, according to the Election Commission itself. The lengthy delays that take place in what gets touted as the world’s most populous democracy are wholly unnecessary and avoidable, and should be ended without delay. In the US, voters know who the next US President is soon after voting gets concluded, with delays occurring only very rarely, and that too never routinely as is the case in India.

Rather than prune the items on which 28% tax has been levied, the slab needs to be eliminated entirely. The concept of “luxury” goods comes from a mindset that regards poverty as the natural state of a citizen of India, and views with disfavour any efforts at betterment of circumstances. So-called “luxury” goods create employment for not just millionaires, but for the common man as well, and were there to be an effective strategy, India with its ancient traditions and its global goodwill can be the source of several international brands rather than its present fate of being made simply a dumping yard for such brands. However, for that to happen, tax policy has to be such as would encourage rather than stifle growth the way very high rates tend to do. Even the 18% rate is too high, and there is a strong case for a uniform 12% or even 10% rate on all items. The way in which GST can be converted into the “Good & Simple Tax” sought by Prime Minister Modi is to ensure a low and uniform rate, and hopefully such wisdom will before long dawn on the GST Council, which is far too crowded with bureaucrats rather than have within its midst a majority of those actually at the receiving end of such tax measures. Low taxes and gentle compliance will expand the tax base manifold in a way that coercion cannot. It is laughable that only 2.06 crore Indian citizens pay income tax. Despite all the measures used, such as boosting punishments and enhancing the powers of officials to a level not seen since the 1970s, the number of registered taxpayers has risen only to 4.07 crore from 3.65 crore. Just as there is a welcome relook at GST, there should be a second glance at income tax provisions as well, to make them taxpayer friendly. The next meeting of the GST Council is expected to reduce forms from 3 to 1. It is a commentary on the method of functioning of the bureaucracy that such essential simplification of the processes of compliance was not embedded from the beginning in the GST measures. Making GST “good and simple” should be an immediate priority of the government. 

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