Proposed Reforms in Goods and Services Tax (GST)
UPSC Relevance
Prelims: Indian Polity and Governance (Constitutional Bodies - GST Council), Economic and Social Development (Indian Economy - Taxation).
Mains: General Studies Paper 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Government Budgeting; Issues related to direct and indirect taxes.
Key Highlights from the News
The central government proposes major reforms in the Goods and Services Tax (GST) system.
There is a proposal to shift 99% of products in the 12% slab to a 5% tax rate, and 90% of products in the 28% slab to an 18% rate. This will reduce the tax burden on consumers.
Rationalising the number of GST slabs and bringing similar products under the same slab will help reduce tax-related ambiguities and litigation.
Besides changes in tax rates, the government also aims to simplify procedures like registration, return filing, and refunds.
Although these changes might lead to revenue loss for the government, it hopes to compensate for this loss through increased consumption and expansion of the tax base.
Reducing the tax rate to 5% will help curb input tax credit frauds and tax evasion.
There are concerns about how these proposals will affect the revenue of State governments.
Due to tax exemptions, bringing petroleum products, which are a major revenue source for states, under the ambit of GST might be further delayed.
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