Letters to the editor

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Published: May 21, 2015 12:28:44 AM

Getting the GST structure right

Getting the GST structure right
Apropos of the column “Use GST Bill breather to set it right” (May 19), Dr Govinda Rao has made many substantial and significant suggestions. He laments that the GST structure, as contemplated currently, is afflicted with serious design-faults that must be removed at this stage itself and nothing short of an ideal GST should be allowed to take off. True, the GST model that is being debated is a Make-in-India GST that has no parallel in the world. For the first time, a new institution—GST Council—constitutional though it is, would take precedence over Parliament and State Legislatures in laying down the rate structure. GST is a consumption tax and which State would collect the tax depends upon the place of supply and  the revenue of the States would depend upon the place of supply. The GST Council is going to decide the place of supply of goods and services.. While determining the place of supply of goods is rather simple, in certain sophisticated services like telecommunication, achieving consensus on where the service is deemed to be supplied is not going to be that simple. The1% additional tax (actually not more than 1%) on the supply of goods (and not on supply of goods and services, as mentioned in the article) in the course of inter-State trade or commerce owes its origin to the paranoid apprehension of revenue loss by the ‘gainers’ of CST. Economists, with no exception, are frowning at the serious cascading it would lead to, thus hitting the efficacy of GST itself. That said, it is also true that the ultimate shape of all reforms, including tax reforms, is politically determined and not necessarily driven by good economic theories. Yet, as
Dr Rao hopes there is still time to ponder over the pitfalls staring at the face of the GST ‘designed’ in the GST Bill.
TR Rustagi

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