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Editorial

ED EDIT-Sound Decision to Not Raise GST Rates GST Council should focus on data analyti

December 21, 2019 05:51 AM

COURTESY THE ECONOMIC TIMES DEC 21

Sound Decision to Not Raise GST Rates
GST Council should focus on data analytics
The Goods and Services Tax (GST) Council’s decisions, one, not to tinker with the GST rates despite the revenue shortfall and, two, to fix a uniform rate of 28% on lotteries is welcome. Status quo on rates provides relief to consumers at a time of rising food prices. That the council, for the first time, voted to fix a uniform rate on lotteries is a sign of maturity and shows that it is working well three years after the rollout of the levy. The GST Act had prescribed two rates: 12%, if the lotteries are sold within the same state, and 28%, if a state sells its lottery tickets outside its jurisdiction. A decision was taken to put the matter to vote following wide divergence among states over whether there should be a single or dual rate. Voting is a sensible way to reach a decision on such a question.

The council should move towards lower and fewer rates to raise revenues and make compliance easy. Ideally, majority of goods must attract a central rate, along with a merit rate and a demerit rate. A further widening of the tax base to include petro fuels, electricity, real estate, tobacco and alcohol under GST will enable manufacturers to claim full credit for inputs taxes paid across the value chain, make production efficient and boost revenues. Higher revenues will enable the Centre to pay the compensation that it has guaranteed to the states for transition to GST, and not renege on the constitutional obligation. Further, subsuming all indirect taxes in GST would remove the need to impose any added duty on imports to offset the effect of embedded taxes on Indian producers.


To shore up revenues, the focus should be on checking evasion. GST creates audit trails across the income and production chain. So, it throws up a mine of information that must be used to widen the tax base. Data analytics must be deployed to not just the data that is uploaded on the GST Network but also to track the physical volumes of raw materials along their production chain ending in tax-evaded goods. If garments evade taxes, the fabric, and the yarn that preceded it, also must have. But the suppliers of the fibre that is spun into yarn are big-time producers, accountable for who they sell to.

 

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