{"id":184098,"date":"2022-05-12T20:41:26","date_gmt":"2022-05-12T15:11:26","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=184098"},"modified":"2022-05-12T20:41:26","modified_gmt":"2022-05-12T15:11:26","slug":"heading-for-gstexit","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/heading-for-gstexit\/","title":{"rendered":"Heading for GSTExit\u00a0"},"content":{"rendered":"


\n<\/span>News<\/span><\/b>: Recently, Britain witnessed Brexit because loss of some sovereign freedom in return of the economic gains of a common European market was capitalised. India may also see the \u201c<\/span>GSTExit<\/span><\/b>\u201d if the trust and faith between the centre and the state is not revived in the <\/span>Union-states relationship.<\/span><\/b>\u00a0<\/span><\/p>\n

Importance of GST<\/span><\/b>\u00a0<\/span><\/p>\n

The GST untangled <\/span>disparate taxation structures<\/span><\/b> across various states, reduced transportation costs and created a <\/span>unified market<\/span><\/b> that would boost economic growth and yield buoyant tax revenues for everyone to share.<\/span>\u00a0<\/span><\/p>\n

Issues\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

The <\/span>2015 GST report<\/span><\/b> proclaimed that the GST would help in <\/span>\u201cmaking one India<\/span><\/b>\u201d through <\/span>centralised GST<\/span><\/b> by curtailing states\u2019 fiscal powers. However, the GST could pave the path for the <\/span>over-arching centralisation project. <\/span><\/b>For example<\/span>,<\/span><\/b> one nation, one language\u201d, \u201cone nation, one religion\u201d, \u201cone nation, one election\u201d etc. This seems to be <\/span>anti-federalist<\/span><\/b> and <\/span>anti-pluralistic ideas<\/span><\/b> of \u201c<\/span>one India<\/span><\/b>\u201d.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Five years after GST, Tax buoyancy has actually declined. The GST has led to fight between the Union and state governments during Covid-19.\u00a0<\/span>\u00a0<\/span><\/p>\n

The GST induced <\/span>fiscal federalism problem<\/span><\/b> has entered into other domains like the union and state governors fighting over Hindi impositions, NEET exam etc.\u00a0<\/span>\u00a0<\/span><\/p>\n

The GST has ruptured<\/span> India\u2019s larger federal structure <\/span><\/b>and destroyed trust between the Union government and states.<\/span>\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

What are the issues in the GST Regime?<\/span><\/b>\u00a0<\/span><\/p>\n

After the introduction of <\/span>the Goods and Services Tax (GST) in 2017<\/span><\/b>, state governments lost their independent taxation powers. However, state had <\/span>fiscal independence<\/span><\/b> in liquor and fuel as both were exempted from the GST.\u00a0<\/span>\u00a0<\/span><\/p>\n

The <\/span>share<\/span><\/b> of both items in <\/span>revenue generation<\/span><\/b> have increased since the GST. Earlier, Both accounted for over 1\/3rd of <\/span>states\u2019 own tax revenues<\/span><\/b>. However, the <\/span>alcohol\u2019s share<\/span><\/b> in overall state taxes has increased by 50% from the pre-GST years. In addition, Both the Union and state governments levy <\/span>high fuel taxes<\/span><\/b> to generate revenues as they do not have to seek <\/span>permission<\/span><\/b> of each other<\/span>\u00a0<\/span><\/p>\n

The state governments kept <\/span>liquor shops<\/span><\/b> open during Covid-19 lockdowns to compensate for the <\/span>loss of revenue<\/span><\/b> because they had no other independent means to raise resources.\u00a0<\/span>\u00a0<\/span><\/p>\n

This GST framework and the <\/span>fiscal independenc<\/span><\/b>e in the fuel and alcohol domain is punishing the common Indian. For example, India has the highest fuel tax rates in the world.\u00a0<\/span>\u00a0<\/span><\/p>\n

The GST relies upon the foundation of <\/span>\u201ccompensation guarantee\u201d<\/span><\/b> based on which states surrendered their fiscal powers in return for <\/span>guaranteed revenues<\/span><\/b>. This foundation is going to end and the trust deficit would plague GST.<\/span>\u00a0<\/span><\/p>\n

Way Forward<\/span><\/b>\u00a0<\/span><\/p>\n

The technical approach to the problem of states\u2019 <\/span>growing reliance<\/span><\/b> on <\/span>liquor<\/span><\/b> and <\/span>fuel taxes<\/span><\/b> is by bringing these sin goods within the GST ambit is not the solution. The root cause lies not in economics but in <\/span>politics<\/span><\/b>.\u00a0<\/span>\u00a0<\/span><\/p>\n

Fixing GST requires a fundamental reset of the<\/span> Union-states relationship<\/span><\/b>. It requires a state of mutual trust and respect. Both governments should uphold the value of <\/span>cooperative federalism<\/span><\/b> by extending it to ethics.<\/span>\u00a0<\/span><\/p>\n

India has a lot of economic, social and political diversity. Therefore, the GST was always going to be a tough proposition.\u00a0<\/span>\u00a0<\/span><\/p>\n

The <\/span>revenue guarantee agreements<\/span><\/b> between the Union and states are necessary but not sufficient to make GST tenable.\u00a0<\/span>\u00a0<\/span><\/p>\n

The central government should deftly <\/span>balance all stakehol<\/span><\/b>ders and win back their confidence instead of just bringing alcohol and fuel within the GST ambit. This would further constrain the fiscal sovereignty of states.<\/span>\u00a0<\/span><\/p>\n

Source<\/span><\/b>: The post is based on an article \u201c<\/span>Heading for GSTExit<\/span><\/b>\u201d published in the Indian Express<\/strong> on 12<\/strong><\/span>th<\/strong> May 2022<\/strong>.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

News: Recently, Britain witnessed Brexit because loss of some sovereign freedom in return of the economic gains of a common European market was capitalised. India may also see the \u201cGSTExit\u201d if the trust and faith between the centre and the state is not revived in the Union-states relationship.\u00a0 Importance of GST\u00a0 The GST untangled disparate… Continue reading Heading for GSTExit\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10328,"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":[212,10500],"class_list":["post-184098","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-2","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704886280},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/184098","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\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=184098"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/184098\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=184098"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=184098"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=184098"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}