Is a progressive GST possible?4 min read . Updated: 06 Sep 2017, 03:17 AM IST
The short answer is no. The long answer then is to focus on correcting the unfairness and skew in goods and services tax (GST), with greater redistribution
India has one of the lowest direct tax to GDP (gross domestic product) ratios in the world. This was documented in last year’s Economic Survey. When it comes to taxing income, we have a very generous threshold for exemption. As Praveen Chakravarty pointed out in a BloombergQuint column, India is the second-most generous country, among 20 major countries, when it comes to granting exemption from income tax. Tax liability kicks in only when your income exceeds 2.4 times the national per capita income. So, a lot of income earners legitimately escape the income-tax net. For instance, if the income exemption limit had been kept at Rs1.5 lakh in in 2012-13, then tax collection would have increased by Rs31,500 crore and we would have had 16.5 million new taxpayers. Those are automatic additions to the tax net, since incomes rise with GDP, and taxable brackets need not.