13th Finance Commission Chairman called for GST Reform

Context

  • The Goods and Services Tax (GST), introduced in India in 2017, is characterized by multiple tax rates and a compensation cess on certain goods The structure, which was largely designed to maintain revenue neutrality, has been deemed counterproductive
  • High GST rates have led to an increase in tax evasion and fraud.

 Key Issues involved in the GST Regime

  • Multiplicity of Tax Slabs: One of the persistent challenges with the GST regime is the multiplicity of tax slabs.
  • The GST regime in India is characterized by multiple tax rates and a compensation cess on certain goods.
  • It, largely designed to maintain revenue neutrality, has been deemed counter-productive.
  • Compliance Burden: While GST is intended to simplify tax procedures, the compliance burden on businesses has increased significantly.
  • Frequent changes in tax returns and reporting requirements have turned out to be a compliance nightmare.
  • Delayed ITC Refunds & Penalties for Belated Filings: Delayed Input Tax Credit (ITC) refunds and penalties for belated filings are other significant issues faced by taxpayers.
  • Ambiguity in Anti-Profiteering: There is ambiguity in the anti-profiteering rules under the GST regime.
  • These rules are intended to ensure that businesses pass on the benefit of reduced tax incidence to consumers.
  • However, the lack of clear guidelines has led to confusion.
  • Technical Glitches in GST Portal: The GST portal has been a puzzle and cause of concern for many taxpayers since its inception.
  • Harmony between the provisions of the law and the functionality offered on the GST portal remains elusive.

 Single Tax Rate suggested by Vijay Kelkar

  • Vijay Kelkar suggested switching to a single tax rate of 12% and sharing revenues with local governments and municipal corporations
  • He argued that the genesis of the current GST fraud lies in the very structure of the GST rates.
  • High rates of GST make it lucrative for fraudsters to evade taxes.
  • A single GST rate of 12%, with revenues shared equally with all tiers of the government and Union Territories, should be introduced at the earliest.

 Benefits of a Single GST Rate

  • Most developed and emerging market economies have a policy of a single GST or Value Added Tax (VAT) rate on goods and services.
  • Countries with a single rate and simple GST or VAT laws have been successful in optimizing tax revenue and minimizing tax disputes.
  • Of countries with GST or VAT systems, 80% have opted for a single tax rate, including Singapore, New Zealand, the United Arab Emirates, and Japan.

Conclusion

  • The Ministry of New and Renewable Energy (MNRE) has brought into effect the Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019.

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