{"id":123680,"date":"2021-08-05T19:01:17","date_gmt":"2021-08-05T13:31:17","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=123680"},"modified":"2021-08-11T15:37:16","modified_gmt":"2021-08-11T10:07:16","slug":"a-grand-tax-bargain-in-danger-of-coming-apart","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/a-grand-tax-bargain-in-danger-of-coming-apart\/","title":{"rendered":"A grand tax bargain in danger of coming apart \u00a0"},"content":{"rendered":"<p><strong>Source<\/strong>: <span style=\"color: #0000ff;\"><a style=\"color: #0000ff;\" href=\"https:\/\/epaper.thehindu.com\/Home\/ShareArticle?OrgId=G308RDHAJ.1&amp;imageview=0\">The Hindu<\/a><\/span><\/p>\n<p><strong>Relevance<\/strong>: Issues with GST regime<\/p>\n<p><strong>Synopsis<\/strong>: A version 2.0 of GST may have to be designed sooner rather than later.<\/p>\n<p><strong>Issues existing with GST<\/strong><\/p>\n<ul>\n<li><strong>Non-expanding tax base<\/strong>: The <strong>tax base of GST does not appear to be expanding.<\/strong>\n<ul>\n<li>The Tax to Gross value addition (GVA) is only about 5% to 6.5% though GVA growth was much higher.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Political architecture<\/strong>: The <strong>fundamental weakness of the GST is its political architecture<\/strong>.\n<ul>\n<li>In the voting, the central government has <strong>one-third vote and States have two-thirds<\/strong> of total votes (with equal voting rights regardless of size and stake).<\/li>\n<li>With the support of a dozen small States whose Budget is mostly underwritten by the central government the game is hugely in the Centre\u2019s favour.<\/li>\n<li>With equal value for each States\u2019 voting, larger and mid-sized States feel short-changed.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Design flaws<\/strong>: There exist <strong>design flaws in the tax structure. <\/strong>\n<ul>\n<li>Nearly 45% to 50% of commodity value is outside the purview of the GST, such as petrol and petroleum products.<\/li>\n<li>Most trading and retail establishments, (however small) are out of the fold of the GST.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Exemptions from registration and taxation of the GST<\/strong> have further eroded the GST tax base compared to the tax base of the pre-existing VAT.\n<ul>\n<li>As multiple rates are charged at different stages, it goes against the lessons of GST history.<\/li>\n<li>This tax works well with a single uniform tax rate for all commodities and services at all stages, inputs and outputs alike.<\/li>\n<li>India stands out and is among the five countries to have four rates\/slabs.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Exclusion<\/strong>\n<ul>\n<li>Petroleum products remaining outside the purview of GST has helped the Centre to <strong>increase cesses and decrease central excise. <\/strong>Central excise is shareable with the States while cesses are not. Equity requires that petrol and diesel be brought under the GST.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Compliance with GST return (GSTR-1) filing stipulation<\/strong> and the resultant tax information is not up to date.\n<ul>\n<li>The gap in filing GSTR-1 was 33% in 2019-20 and has been increasing.<\/li>\n<li>Fraudulent claims of Input Tax Credit (ITC) are quite high.<\/li>\n<li>Tax evasion, estimated by a National Institute of Public Finance and Policy\u2019s paper, is at least 5% in minor States and plus 3% in the major States.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>Conclusion<\/strong><\/p>\n<p>There is need to address policy gaps along with compliance gaps otherwise the grand bargain that resulted in the GST regime, will come apart.<\/p>\n<p><span style=\"text-decoration: underline;\"><strong><span class=\"TextRun SCXW98316315 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW98316315 BCX0\">Terms to know<\/span><\/span><\/strong><\/span><span class=\"TextRun SCXW98316315 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW98316315 BCX0\">:<\/span><span class=\"NormalTextRun SCXW98316315 BCX0\">\u00a0<\/span><\/span><\/p>\n<ul>\n<li><strong><span style=\"color: #0000ff;\"><a class=\"Hyperlink SCXW98316315 BCX0\" style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/input-tax-credit\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"TextRun Underlined SCXW98316315 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW98316315 BCX0\" data-ccp-charstyle=\"Hyperlink\">Input Tax Credit (ITC)<\/span><\/span><\/a><\/span><\/strong><\/li>\n<li><strong><span style=\"color: #0000ff;\"><a class=\"Hyperlink SCXW98316315 BCX0\" style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/analysis-of-gst-regime-in-india\/\" target=\"_blank\" rel=\"noreferrer noopener\"><span class=\"TextRun Underlined SCXW98316315 BCX0\" lang=\"EN-US\" xml:lang=\"EN-US\" data-contrast=\"none\"><span class=\"NormalTextRun SCXW98316315 BCX0\" data-ccp-charstyle=\"Hyperlink\">GST<\/span><\/span><\/a><span class=\"EOP SCXW98316315 BCX0\" data-ccp-props=\"{&quot;134233279&quot;:true,&quot;201341983&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/span><\/strong><\/li>\n<li><span style=\"color: #0000ff;\"><strong><a style=\"color: #0000ff;\" href=\"https:\/\/forumias.com\/blog\/gross-value-addition-gva\/\" target=\"_blank\" rel=\"noopener\">GVA<\/a><\/strong><\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Source: The Hindu Relevance: Issues with GST regime Synopsis: A version 2.0 of GST may have to be designed sooner rather than later. Issues existing with GST Non-expanding tax base: The tax base of GST does not appear to be expanding. The Tax to Gross value addition (GVA) is only about 5% to 6.5% though&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/a-grand-tax-bargain-in-danger-of-coming-apart\/\">Continue reading <span class=\"screen-reader-text\">A grand tax bargain in danger of coming apart \u00a0<\/span><\/a><\/p>\n","protected":false},"author":10316,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[3168,216,3203,8721,8788,8895],"class_list":["post-123680","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-goods-and-services-tax","tag-gs-paper-3","tag-gst","tag-issues-with-gst","tag-mobilisation-of-resources","tag-revenue","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704782765},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/123680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10316"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=123680"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/123680\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=123680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=123680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=123680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}