NEW DELHI: As the government gears up to find ways to earn more money from the nation-wide GST tax whose collections have been below par now for more than two years, experts are again raising questions on why a low single rate of GST was not introduced.
Former finance secretary Vijay Kelkar and economist Ajay Shah in their yet to be released book ‘In Service of the Republic’, have argued that a single GST rate of 10 per cent applied to 70 per cent of India’s produce would have earned the Centre and states 7 per cent of the country’s GDP and would have been easier to administer.
“A single 10 per cent rate applied on 70 per cent of the economy yields 7 per cent of GDP as tax revenues and even if we actually obtain a part of this, we are broadly okay,” Kelkar and Shah said in the book, adding “At this low rate it would have been able to possible to avoid all exclusions. Petroleum products could have gone in, real estate could have gone in.”
India has a multi-rate GST system with goods being taxed at 0, 5, 12, 18 and 28 per cent besides some goods such as petroleum products and liquor being left out of the GST set up. The complexity of the system and frequent changes are often blamed for poor collections. Till November, the total GST collections have been just over `8 lakh crore, a shortfall of nearly `1 lakh crore against the target.
They argued that for sin goods such as tobacco and liquor, there could have been layers of non-VATable ‘sin taxes’ on top of basic GST imposed by states. States could also chose to impose carbon tax such as a tax on plastics used, layered on top of GST.
With India turning into a near $3 trillion economy in 2019, a basic 10 per cent GST on 70 per cent of the economy would have translated into about $20 billion or Rs 14.2 lakh crore in GST revenues. Sin taxes on top of that on a select few articles could have got states some extra revenues.