Letters: Pitfalls in disguise

Finally, the first step towards a GST has been taken. It is being hailed as the most important reform after 1991. One can easily see that the GST, properly designed and implemented can be very useful, save time and uncomplicated things, particularly for smaller businesses. It is not that easy to see the GST as the sufficient condition to jack up the GDP growth rate by 1.5% -2% per year; it may not even be a necessary condition.

In fact, GST might have some negative outcomes too. Being an indirect tax, it will fall disproportionate heavily on the poorer sections. It is necessary to remember that when first mooted, the revenue neutral rate (RNR) was expected to be 12%; now the RNR is minimum 18%, one of the highest in the world.

The separate treatment of the sin goods like tobacco and alcohol will make the states less inclined to move towards banning these harmful substances. The states will lose their financial flexibility and will have at the mercy of the Central government and on the Finance Commissions appointed by it; surely not a strengthening of federalism.

The states should have bargained better. Like getting the Center to agree to stop levying surcharge and cess on direct taxes, and thus not sharing these new sources of income with the states. There is no reason why these add-on taxes must be there.

P Datta, Kolkata

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