Relieve GST of its warps to regain its reform cred

livemint.com:

₹1.5 trillion, a fiscal anxiety over GST revenue has begun to ease at last; this buoyancy could relieve state coffers of their need for cess top-ups. By acting a slice-off of value addition instead of sale prices, its design got informal units to sign up—drawn by input credits and pushed by business clients. Much of its switchover pain is now in the past, as technical glitches and administrative snarls get sorted out.

Compliance has improved, with geo-tags and biometrics reportedly under trial for the Centre’s arsenal against tax fraud. Gross GST intake finally looks likely to go above 6.5% of GDP, which is another bright sign. Even so, its progress needs to be mapped, above all, by its reformist impact on the economy.

As a generic idea, the core promise of GST is what many consider the first canon of taxation: Simplicity. A single rate levied on all goods and services would not just be easy for all to grasp, it would close most if not all space for tax variability by whim, which is always a critical factor in businesses being more state- than market-oriented. By putting tax policy on auto-pilot above lobbies, a simple tax reduces the state’s role in shaping outcomes and boosts the market’s, which is what we must aim for in an economy that’s yet to slough off legacy burdens.

Alas, a stated need to keep rates ‘progressive’ so that luxury buyers pay more, while a reasonable call in itself, has nudged Indian GST down a slippery slope of kaleidoscopic levies enforced through multiple slabs and definitions. So distorted has the old rationale got, with tweaks galore, that the GST Council has been bogged by tiny specifics like inverted input rates in value chains. And then we have the distortive effects of various exceptions