Make GST foolproof

Prime Minister Narendra Modi is on the ball — there cannot be a common GST rate for milk and Mercedes in India where the gulf between the rich and the poor is wide and there are huge income disparities. But all essential goods and services that are consumed by the poor can be easily exempted from GST. For example, all unbranded consumables essential for the living, including milk, should be kept in the zero duty slab. However, branded items, including milk packed in cans and cartons, should attract a higher tax rate. In a poverty-ridden country like India, Mercedes is rightly perceived in the category of sin goods and should fall in the highest tax bracket. Taking into account the socio-economic inequality, there cannot be one tax rate in the country. But, this does not justify multiple tax rates that have made the GST structure complex and convoluted.   

Besides standard tax slabs — 0, 5, 12, 18 and 28 per cent — there is an array of tax rates such as special rates for gold (3 per cent), precious stones (0.25 per cent), yacht and aircraft for personal use (3 per cent), cess and so on. After one year of implementation of the GST, the government must try to minimise the tax slabs without “fear and favour” to certain industrialists or industries. For example, items in the 12 per cent and 18 per cent can be easily merged into one slab of 15 per cent without sacrificing any revenue. Similarly, special rates could be assimilated in the main slabs by trimming the lowest rate of 5 per cent by a hundred basis point. Addition of valuable items in the slab will not only raise revenue, but also provide relief to the consumer who is currently paying 5 per cent duty on items like insulin and khakra. Thus, the principle of reasonableness, without pride, prejudice and politics, can easily resolve the problem of tax multiplicity from a reform that was initiated to simplify the complex indirect tax regime.  

Admiringly, Arun Jaitley has given hints that tax slabs could be rationalised with the improvement of GST collections. But, it should be the other way around. Tax collection will increase by minimising rates, simplifying procedures and making compliance easier.