The good and simple tax? All eyes on GST Council's two high-rate slabs

Today, the GST Council meets to undertake long-overdue reforms to rationalise the goods and services tax (GST), focusing on eliminating two high-rate slabs (12 and 28 per cent). This article visually summarises, in two tables, how not-simple the GST is, which leads to serious but under-recognised problems of arbitrary and coercive implementation, evasion, mis-classification, corruption, and adversely affects the ease of doing business.

 

Table 1 shows that today, contrary to popular belief, there are almost 45 distinct rates compared to the standard five slabs. Most of the multiplicity comes from the cesses, but some also from non-standard slabs. 

 

Table 2 identifies four kinds of complexity: Duty inversion, arbitrary classification, value-based rates, and end-use and input-based rates, each with its distinctive pathologies. 

 

Just to convey a sense of the anomalies to rectify, consider two: In Table 1, look at the boondoggle for buyers of personal yachts and jets. In Table 2, look at the paratha-pizza-pappadom-popcorn puzzles!

 

Author affiliations: Madras Institute for Development Studies, Insignia, Centre for Effective Governance of Indian States, private consultant, and Peterson Institute for International Economics, respectively