Anniversary of Goods and Services Tax (GST) in India

The eighth anniversary of GST in India on July 1 highlighted significant issues with the current system, marked by poor tax collection figures.

Implications and Challenges

• Consumption Tax Indicator: A dip in GST collections indicates reduced economic activity and system inefficiencies.
• Inclusion of Fuel in GST: A common demand, but resisted by state governments due to revenue independence concerns.
• Need for Structural Changes: Achieving 'one nation, one tax' requires comprehensive inclusion.

Recommended Reforms

• Increased State Share: The Centre should agree to higher State shares in central taxes.
• Reduction of GST Rates: Urged by stakeholders and currently under examination by the GST Council.

Future of GST Compensation Cess

• Current Purpose: Initially to compensate states for GST-related losses, extended post-COVID-19.
• Recommendation: Avoid merging with broader GST rates and remove once its purpose is fulfilled.

Broader Taxation Covenant

• Center-State-People Agreement: Taxation involves multiple stakeholders.
• Public Benefit: Removing unnecessary cesses can boost public morale and urban consumption.