GST still far from simple: Arvind Subramanian

Former CEA Arvind Subramanian. File
| Photo Credit: The Hindu

Revenues from the seven-year old Goods and Services Tax (GST) had not lived up to expectations, having attained pre-GST levels only now, and the objective of a ‘Good and Simple Tax’ remains elusive, former Chief Economic Advisor Arvind Subramanian averred on Thursday, terming the lack of critical data such as refunds a challenge.

Blaming the poor revenue performance to a “rate-cutting spree” by the GST Council between late 2017 and 2019, the economist said both the Centre and the States were complicit in this. “The focus was on collections, because refunds were not published and we were looking at the wrong number.. had the refunds data been published, we would have been much more careful about rate cuts,” he reckoned.

“In February, the government started releasing net GST collection numbers and has now stopped publishing it again. Because we are not getting refunds data, we are under the impression that revenues are doing very well,” Mr. Subramanian said at a seminar on seven years of GST hosted by the Centre for Social and Economic Progress.

Terming the multiple cess rates and the GST rate structure ‘monstrous’, Mr. Subramanian mooted the need to try and simplify the GST rates as much as possible. “You should just have one cess rate, one standard rate and one low rate,” he stressed.

Pointing to tweaks and changes effected in the GST regime every time the GST Council meets, the former CEA said this practice was taking the system in a backward direction in terms of simplicity and rationalisation. In 2015, he had recommended a GST regime with three rates — one rate for essential goods, a standard 18% rate, and a 40% levy for demerit goods.

Mr. Subramanian also said he no longer believed it was a good idea to include items like electricity, petroleum and alcohol in the GST net, something that industry and economists like him had been advocating for years.

“I now believe that would be a bad idea… especially in the current context of the acrimonious relations between the Centre and the States, I don’t think it’s politically advisable to expect or ask the States to give up more sovereignty. They have compromised [for GST’s launch before 2017] but other conditions have changed too much for the compromise to be relevant again,” he said.

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