India’s GST System Needs Simplification: Arvind Subramanian
Former Chief Economic Adviser Arvind Subramanian has called for an overhaul of India’s Goods and Services Tax (GST) framework, citing its complexity and contribution to “tax terrorism.” Speaking at an event organized by the Centre for Policy Research, he emphasized the need for rate rationalization and simplification of this landmark indirect tax reform.
Key Issues Highlighted
- Complexity in Rates:
The GST regime includes multiple cess rates, which could total 50 to 100 rates when additional complexities are considered.
Such a structure complicates compliance and administration.
- Excessive Tax Demands:
Subramanian pointed out that GST has increased instances of tax terrorism—a term used to describe coercive tax collection practices.
Excessive demands by tax authorities have historically been an issue, now exacerbated under GST.
- Rate Rationalization:
A simpler rate structure is needed to improve compliance and foster revenue growth.
Achievements of GST
Despite these challenges, Subramanian acknowledged GST’s transformative impact:
Unified Tax System: GST subsumed 16 indirect taxes and cesses, creating a “One Nation, One Tax, One Market” framework.
Improved Taxation Structure: It eliminated the previous fragmented system managed separately by the Centre and states.
The Need for Reform
While GST has streamlined India’s taxation system, its complexity undermines its effectiveness. Subramanian’s critique underscores the urgent need to:
Simplify Tax Slabs: Consolidate multiple rates into fewer, predictable slabs.
Address Tax Terrorism: Develop transparent mechanisms to reduce coercive practices.
Boost Revenue Growth: Achieve higher compliance through simplicity and fairness.
Conclusion
India’s GST system, though revolutionary, requires an immediate overhaul to fulfill its promise of a simple, efficient, and fair tax regime. Subramanian’s insights provide a roadmap for addressing these critical issues while ensuring the GST system delivers on its goals of economic integration and growth.
