PM Modi's Economic Adviser Bibek Debroy Calls For Single GST Rate

Watch Siddharth Zarabi, Managing Editor, Business Today TV decode the call made by Prime Minister’s Economic Advisory Council Chairman Bibek Debroy that India should have a single goods and services tax (GST) rate and an exemption-less tax regime. Speaking at the TIOL Tax Congress 2022, Debroy was cited as saying: “as a polity, we need to recognise that the GST really should be the same regardless of the product. If progressivity is to be introduced, it is best done by direct taxes, not GST, or indirect taxes,” adding that these were his personal views. The original GST revenue neutral rate pegged by the Union Finance Ministry was 17 percent, but the average GST rate at present is 11.5 percent, he said. “We must be willing to pay tax or we must be willing to settle for reduced delivery of public goods and services”. India has four major GST slabs - 5 percent, 12 percent, 18 percent, and 28 percent. Over and above the 28% rate applicable for some ‘demerit’ and luxury goods, an additional cess is levied as well. In the words of Prime Minister Narendra Modi, the Goods and Services Tax (GST) is “a path-breaking legislation for New India”. The GST was rolled out at midnight of 1 July 2017 in a ceremony held in the Central Hall of Parliament. The government said that GST is not merely a tax reform but a milestone in realizing Sardar Vallabhbhai Patel’s dream of building ‘Ek Bharat – Sreshtha Bharat’. Before 1 July 2017, the Indian indirect tax regime was highly fragmented. Centres and States were separately taxing goods and services. There were many taxes like excise duty, service tax, VAT, CST, purchase tax, entertainment tax, etc. In addition, there was a multiplicity of rates, laws, and procedures. This caused a heavy compliance burden. Imposition of tax on tax was another serious problem. For example, VAT was levied on a value that included excise duty. Input tax credit chain broke as goods moved from one state to another, resulting in hidden cost for the business. There were tax nakas at every inter-state border, creating bottlenecks in inter-state transport of goods. Every state was effectively a distinct market for the industry as well as consumer. Industry’s choice of locating factories or warehouses was heavily influenced by the prevailing tax regime rather than pure business consideration, making the industry uncompetitive. 2000 – PM conceptualized GST and setup a committee to design GST model 2003-04 – FRBM Committee formed which recommended introduction of GST 2006 – Union Finance Minister, in the 2006-07 Budget Speech, announced introduction of GST from April 1, 2010. 2009 – First discussion paper on GST released 2011 – Constitution (115th Amendment) Bill 2011 for incorporating relevant provisions of GST introduced in Parliament 2011-13 – GST Bill referred to Standing Committee 2014 – Constitution (115th Amendment) Bill lapsed with the dissolution of 15th Lok Sabha, necessitating a fresh Constitutional Amendment Bill 2014-15 – The Constitution (122nd Amendment) (GST) Bill, 2014 was introduced and passed in May 2015 August 2016 – The Constitution (101st Amendment) Act was enacted September 2016 – Constitutional changes made vide 101st Amendment come into force. GST Council created, 1st GST Council Meeting held May 2017 – GST Council recommended all the rules 1st July 2017 – GST Launched