Reset GST to make it a 'good and simple tax'

livemint.com:

₹2 trillion, although the interim budget for 2024-25 had a relatively modest projection, we have the fiscal space to rid this levy of its complexity and go for simplified stability. While GST slabs need a reset, we must also widen its coverage to include fuel, liquor and other stuff left out for later consideration. Since states with heavy local levies on these items had feared it would hollow out their coffers, a consensus on this is a challenge.

But a case for it can and should be made. Petroleum products remain particularly overtaxed, with a high domestic burden depriving users of a global moderation in oil prices caused by America’s rise as a producer over the past decade or so. For GST to play a more extensive role in reducing our cost base and making the economy more competitive, fuel should be treated like any other item, not as something easily squeezed for revenue because its demand is somewhat price inelastic.

To allay the anxiety of states over lost inflows, they could possibly be offered a bigger share of the divisible pool of taxes. Or a GST split that’s more than half. A parallel plan to phase out cesses—which states cannot access—could sweeten such a bargain.

Of course, a pitfall to avoid would be a pledge of compensation based on dicey assumptions of tax intake. All said, it’s time to act. GST hasn’t lived up to its potential so far and its guardians must join hands to give it another go.