GST upsurge: This tax needs to be tweaked

States had to be compensated for shortfalls in line with a promise made at the time of GST adoption, and the wait for this need to end has been very long. (MINT_PRINT)
States had to be compensated for shortfalls in line with a promise made at the time of GST adoption, and the wait for this need to end has been very long. (MINT_PRINT)

Summary

  • For 2023-24, India’s GST revenue crossed 20 trillion. If its weak mop-ups are firmly in the past, at long last, we must go for slab and rate reforms.

India’s latest goods and services tax (GST) revenue numbers present an encouraging picture. For March, revenue climbed 11.5% from a year earlier to 1.78 trillion. This is the second-highest monthly mop-up since the tax regime was implemented in mid-2017, topped only by April 2023’s intake of 1.87 trillion. For the latest fiscal year ended 31 March, GST revenue stood at 20.1 trillion, a 12% increase. 

The rise points to strong economic activity. It also raises the hope of under-collections now firmly being a story of the past. States had to be compensated for shortfalls in line with a promise made at the time of GST adoption, and the wait for this need to end has been very long. While the buoyancy of 2023-24 is a relief, it does not relieve policymakers of the need to rejig the rate structure of this tax to align it better with its original idea. 

We need fewer rate slabs, for example, to keep it simple. Which item is slotted where should be easier to guess, as a system featuring a standard rate accompanied by merit and demerit rates would assure us. Rate inversions still torment some industries. A less complex GST will also help secure the benefit of fostering more specialization across the economy.

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