GST reforms

At the time of its rollout in July 2017, the Goods and Services Tax (GST) regime was touted as a major step towards economic integration as it replaced “a maze of indirect taxes” with a single, unified system. It was intended to make tax compliance easier and reduce costs for businesses through greater transparency and efficiency. However, the system has repeatedly drawn criticism over not being as ‘Good and Simple’ as it should be. Finally, the government has set the stage for reforms to improve the GST framework. The proposed new regime envisages lower tax rates and just two slabs (down from four) of 5 per cent and 18 per cent in a bid to bolster the economy and weather the tariff storm.

In recent years, the Modi government’s focus has been on spurring consumption — putting more money in people’s pockets so that they spend more. The GST move, which is in sync with this policy, comes days after Parliament passed the Income Tax (No. 2) Bill. The legislation is aimed at simplifying and consolidating income tax laws, especially for salaried taxpayers. The overarching intention is to lessen the financial burden on the middle class, which has been a time-tested vote bank for the BJP. Notably, the RSS has often raised concerns about the rising cost of living in India, with its chief Mohan Bhagwat lamenting recently that healthcare and education were now beyond the reach of the common man.

The government seems to have realised that the push for self-reliance won’t bear fruit if MSMEs (micro, small and medium enterprises) — which contribute around 30 per cent to India’s GDP — are bogged down by oppressive taxation. Prime Minister Narendra Modi has rightly sought the cooperation of all states regarding the GST proposal. The onus is on the GST Council to pay heed to stakeholders’ suggestions and objections, irrespective of political affiliations, so that consensual reforms can be initiated. This is a must to keep India on track to overtake Germany as the world’s third-largest economy by 2028.

Editorials