Letters: Flawed GST still superior

With reference to A K Bhattacharya’s article, “Who killed GST” (October 26) there is no denying that a goods and services tax rate structure with too many effective rates is undesirable.

The problems of classification disputes, misuse of discretionary powers and lobbying for exemptions referred to by Bhattacharya are all too well known. History has it how the central excise duty structure afflicted with multiple rates and several exemptions caused havoc in its implementation.

That said it must be admitted that policymakers have the formidable task of designing the actual rate structure in the face of achieving multiple objectives, some of which are not only aggressively competing but even conflicting. Unless a rate structure is tested for some time, the revenue it would generate remains uncertain. That is also the worry of the states.

Another problem is that GST rate structure can be decided only by consensus between the Centre and states. The GST Council also has to ensure that the new regime does not push inflation. The constitutional obligation of the Centre to compensate the states for any shortfall in their revenues has a compelling effect. Policymakers tend to be overcautious.

Be that as it may, the expectation from the GST Council is high. The Council is playing a history role. It should leave no stone unturned to reduce the number of rates, mindful of the fact that it takes years to correct distortions in rate structure.

It would, however, be inappropriate to argue that a multiple GST rate structure is no better than the current indirect tax structure. GST is superior by its very nature. Even a defective rate structure cannot rob GST of its merit. It subsumes several central and state taxes. Let us hope for the best.

                T R Rustagi   New Delhi Letters can be mailed, faxed or e-mailed to: 

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