The best of goods & services: GST being negotiated has too many exclusions, we must build consensus on a flawless version
Abstract: If there is one policy reform on which there is consensus, it is the Goods and Services Tax (GST). Yet, as negotiations between the Centre and states reshape this important reform, continuous reassessment is warranted.
If we were to implement the flawless GST as originally recommended by the task force of the 13th Finance Commission (TFC), the gains would be immense. The latter had recommended that India replace myriad central and state indirect taxes by a single uniform value added tax on substantially all goods and services. With the combined indirect tax revenue of the Centre and states a tad below 11%, allowing for a handful of exceptions, the TFC taskforce had pegged the uniform GST rate at 12%.
Taxation at this rate would mean that the taxpayer would not have to pay an unusually high tax on any single commodity or service. The burden will be spread evenly across different goods and services consumed. The single rate would also eliminate production inefficiencies since it would tax value added at each stage of production at the same rate.
As a byproduct, since the GST would be collected at the point of sale rather than production, it will serve to unify India into a single market. There would no more be need to erect border check posts to collect taxes on goods produced in one jurisdiction but sold in another.