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4
August 2017
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Debroy (The Total Investment & Insurance Solutions)
India is a
long way off from the ideal GST structure and it may not get there anytime in
the near future, says NITI Aayog Member Bibek Debroy, who favours three rates.
While
asserting that the move towards the Goods and Services Tax (GST) was a good
one, Debroy says it would have been much better if it had lesser number of tax
rates.
"My
view -- for which the government is slightly upset with me -- is that we should
not have been here (the current GST) but we should have been much closer to the
ideal GST," Debroy told IANS in an interview. The Total Investment & Insurance Solutions
"Once
we are here, I am not very convinced that we will actually get there (the ideal
GST)."
Debroy said
that ideally, there should be a single GST rate, but at present "depending
on how you count it, you have seven rates". The Total Investment & Insurance Solutions
"Every
economist would argue for one rate but no country in the world has that. But
instead of seven rates, have three rates," he said. The Total Investment & Insurance Solutions
While the
government's stand has been that the system would eventually move towards
lesser number of GST rates, Debroy said it now seemed to be a difficult shift.
"My
point is that we don't know what those rates would be. Let's assume they are
12, 18 and 24 per cent, which sound reasonable. Can you imagine the tax rate of
a product currently at three per cent increasing to 12 per cent? Really
tough," the leading economist told.
Gold and
gold jewellery are currently taxed at three per cent under the GST
regime.
Debroy said
that the experiences of other countries had shown that growth and revenue
increases happened through increased efficiency when all products were included
and there were a maximum of two or three tax rates. The Total Investment & Insurance Solutions
"Therefore,
when people say rate efficiency, it will happen, but not right now. In terms of
revenue increases, probably not that much beyond the extension of the base,
because many more people are brought into the net," he said. The Total Investment & Insurance
Solutions
Debroy said
that an ideal GST removes all indirect taxes, puts all items under its purview
and has a single rate. The Total
Investment & Insurance Solutions
"Ideal
GST is still a long way off. Most countries in the world that have moved
towards the GST have taken more than 10 years to reach there -- if they ever
have reached there," he said.
The NITI
Aayog Member said that while there are statements floating around that 140-150
countries in the world have GST, but that's not really the case. The Total Investment & Insurance
Solutions
"What
they have is VAT (Value Added Tax) without the service sector being integrated.
Proper GST exists in not more than six to seven countries in the world."
"And
out of these six-seven countries, with the exception of Canada, all are unitary
countries -- that is, where the central government decides," he said. The Total Investment & Insurance
Solutions
In a country
like India, there can't be the central government unilaterally deciding on the
rates and several other issues, he said.
The Total Investment & Insurance Solutions
"Automatically,
we are therefore talking about the dual GST and about the GST council. Now,
when you have the GST council with all of the states having different
perceptions, even if you assure compensation for revenue losses, what you will
have is a long way off from the ideal GST," he said.
"So you
will have a lot of products outside the GST like electricity, petroleum
products, liquor and tobacco... And depending on how you count it, you have
seven rates, not a single one."
Debroy said
that a positive way to look at it is that there has been some movement on the
issue and that waiting for the ideal GST would have taken 20 more years to
generate a consensus.
"So on
balance, even as a complicated thing, it's a very good thing that has happened.
But it could have been better."The
Total Investment & Insurance Solutions
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