November 01, 2016

Ways out of the GST maze

The Centre has proposed that there be an extra cess on ‘luxury’ goods equivalent to the difference in the current tax rate and the maximum GST rate of 26 per cent. If this is implemented, this would mean six different cess rates on nearly 40 different goods, ultimately leaving us with 10-12 different tax rates in the country.


Praveen Chakravarty emphasises why a cess-ridden GST would neither be a “Good and Simple Tax” nor would have “Good Sense Triumphed”, as former Finance Minister P. Chidambaram put it.


"Finance Minister Arun Jaitley argues that multiple rates are necessary in an unequal society such as India. Wasn’t India as unequal when he pitched GST as ‘one nation, one tax’ just three months ago? If the very premise for States to sacrifice their fiscal autonomy was in the larger interest of a ‘one nation, one tax’, the cess proposal is a betrayal of that promise. NITI Aayog Vice-Chairman Arvind Panagariya has defended the cess proposal by saying “there is no tax theorem that two tax rates are better than four”. This seems to question the very premise for a GST since there is then no proof for the theorem that ‘one nation, one tax’ is better than ‘one nation, 29 States, 25 different tax rates’ either."


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Topic : State Capacity / In : OP-EDS
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