Fifteenth Finance Commission (FFC) chairman N K Singh said on Tuesday that the Goods and Services Tax (GST) system needs to get simpler so that it becomes easier for businesses and traders to comply with it.
Singh said at a book release event here that policy makers need to go back to the drawing board on GST. Singh said that frequent changes have resulted in a clutter that has made compliance difficult for businesses. He was speaking at the release of the book ‘In service of the republic’ by Vijay Kelkar, former finance secretary and chairman of the thirteenth Finance Commission, co-authored with Ajay Shah, a professor at the National Institute of Public Finance and Policy (NIPFP). A task force led by Kelkar had in 2004 advised the finance ministry to bring in GST.
In his book, Kelkar argued that a single, low rate of GST would be administratively simple and would offer the lowest incentives for tax evasion.
GST structure and the tax rates have become the subject of heated debate among policy makers as the tax reform is yet to get stabilised even after two years of its roll out. A deep economic downturn has also forced the GST Council, a federal body with union and state ministers as members, to contemplate ways of raising revenue receipts including by raising tax rates for the first time in the new indirect tax regime. Kelkar advocates a single 10% rate of GST in his book, in place of the current four rate structure comprising 5%, 12%, 18% and 28%.
“Consider the possibility of a single flat rate of 10% GST with a comprehensive base. This draws on the global wisdom that the right way to do a GST is to have a single rate. A single 10% rate applied on 70% of the economy yields 7% of GDP as tax revenue, and even if we actually obtain a part of this, we are broadly okay," the authors say in the book. “At this low rate, it would have been possible to avoid all exclusions. Petroleum products could have gone in, real estate could have gone in," says the book.