Building a better GST: New reforms mark progress, but more is needed

The call for a single rate correctly identifies this multiplicity as a central problem

The debate on India’s goods and services tax (GST) has been stimulated. The leader of the Opposition, Rahul Gandhi, offered a four-point critique: The existing system is overly complex arising from multiple rates; disadvantages micro, small, and medium enterprises (MSMEs); undermines fiscal federalism; and prematurely excludes petroleum products. In response, Prime Minister Narendra Modi has announced a “double Diwali” package of “next-generation GST reforms”, promising to simplify the tax structure by collapsing it into two main slabs of 5 per cent and 18 per cent. These developments can be assessed by measuring them against the principles of “the perfect GST”