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Letter to BS: Reason for under performance of revenues is not evasion

The real reason for under performance is slowdown in the economy and fixing the target too high keeping fiscal deficit in view

Business Standard 

GST
GST

This refers to Mihir Sharma’s column “The big question” (August 6). I find it difficult to agree with his postulate and conclusions. His first postulate is that the goods and service tax (GST) was supposed to be a single rate tax. It is not so. The government never said anything to that effect. In fact, the former finance minister Arun Jaitley famously said that chappals and refrigerator cannot pay same rate of tax. Let me point out that Belgium, Canada (if you include sale tax), Brazil, China, France, Germany, Sweden, UK and others have multiple tax rates. We cannot have just 16 per cent tax on cigarettes. We should have 5, 16 and 28 per cents. Only 12 and 18 have to be merged into 16. Collection of revenue is not at all affected by multiple rates. True, a single rate is easy to administer, but it will ruin the character of the tax. Indirect tax is regressive and one rate will make it more regressive.

The reason for under performance of revenues is not evasion. There is audit, anti-evasion and various verification systems which prevent evasion. There is evasion no doubt since there is some collusion but no cottage industry for invoice manufacture. And universal invoice matching is absurdly illogical. Selective matching of suspected companies is the answer that is being done. The real reason for under performance is slowdown in the economy and fixing the target too high keeping fiscal deficit in view. It is nothing new. It is not under performance but over fixing of target.

Sukumar Mukhopadhyay , New Delhi


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First Published: Thu, August 08 2019. 21:20 IST
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