‘Unnecessarily complex’ GST needs urgent reform: Kelkar

Summary: Vijay Kelkar, an instrumental figure in India's tax reforms and the Chairman of the 13th Finance Commission, has emphasized the need for significant reforms in India's GST regime, advocating for a simplified, single GST rate of 12%. He also suggests establishing an independent secretariat for the GST Council to avoid potential bias from the Union government's management, and proposes a more equitable distribution of GST revenues, including sharing with local governments through a constitutional amendment.

Key Points:

• Call for GST Regime Reform: Vijay Kelkar highlights the complexity of the current GST structure as a hindrance to optimal taxation and a breeding ground for tax evasion.

• Simplification Proposal: A unified GST rate of 12% is suggested to minimize disputes, enhance manufacturing and exports, and align with global practices where a single tax rate prevails.

• Independent GST Council Secretariat: To ensure impartial support and advice to the GST Council, Kelkar proposes the creation of an independent secretariat.

• Revenue Sharing with Local Governments: Advocates for a constitutional amendment to allow GST revenue sharing with local municipalities to strengthen fiscal autonomy and improve governance at the grassroots level.

Additional Insights:

• Global Comparison: The majority of countries with a VAT/GST system utilize a single tax rate, suggesting that India's multi-tiered system is an outlier and potentially less efficient.

• Potential for Enhanced Governance: Equitable revenue sharing, including with local governments, could lead to improved public services and greater accountability, as citizen demand for quality governance increases.

• Challenges and Opportunities: While transitioning to a single GST rate and amending the constitution for revenue sharing pose challenges, these reforms could lead to a more streamlined tax system, reduced evasion, and stronger local governance.

Keywords Explained:

• GST (Goods and Services Tax): A comprehensive, multi-stage, destination-based tax that is levied on every value addition, aimed at creating a single, unified market by replacing all indirect taxes levied on goods and services by the Indian Central and State governments.

• VAT (Value Added Tax): A consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.

Published in : The Hindu

Date appeared in newspaper : 08 April 2024

Link to the article (might require a paid subscription) : https://www.thehindu.com/todays-paper/2024-04-08/th_international/articleGDPCL3C88-6390515.ece

If you find our information useful, kindly consider subscribing to our daily current affair updates. (SUBSCRIPTION BUTTON GIVEN BELOW)