In the longer run, shuffling items from one GST slab to another will not be enough
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Three months into the goods and services tax (GST), the GST Council’s recalibration on Friday offered some immediate relief but left a number of questions unanswered.
Both cutting rates on 27 GST items and easing up on exporters are welcome steps. As for lowering compliance costs for small enterprises, it is strange that the burden of filing returns on a monthly basis was recognized only now.
It would also be wise to keep in mind the possibility of unintended consequences—seen with other micro, small and medium enterprises regulations that provide perverse incentives to stay small.
In the longer run, shuffling items from one GST slab to another will not be enough. Finance minister Arun Jaitley has spoken of eventually reducing the number of slabs. This is essential. So are other structural changes like getting rid of the anti-profiteering provisions, which are a bad idea through and through.
And it will be worth keeping an eye on the hard-hit textile sector as a bellwether for how the GST impacts largely informal sectors.
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