Editorial Simplified : 4th Day of April 2017

This Series of posts covers the essential Editorial from prominent newspapers. The Editorial from the newspapers are compiled by the Subject Teachers form the Academy and provided in notes format so that the aspirants does not waste their precious time in sifting through the newspapers. 

Live Mint

Editorial : GST’s last and critical lap

Context:

The four enabling GST laws have been passed by the Parliament. Now, we must arrange goods and services in the tax slabs keeping in mind the true spirit behind GST.

Important Points:

  • The four GST laws have been passed by the Parliament and tax slabs decided – 0 (exempted), 5%, 12%, 18% and 28%. The maximum cess of 15% has been decided to be applied on demerit goods such as tobacco, aerated beverages, luxury cars etc.
  • Now we must keep the following things in mind
  • The rate structure of the GST has already become more complex than it should’ve been and so now the damage must be limited. In this context, the attempt should not be to move as little as possible from status-quo because than the passing of the GST belies its utility.
  • Rates now decided and goods now classified will remain so for a considerable time and must be done carefully.
  • GST classification should facilitate compliance, minimize inflationary pressures and be a buoyant source of revenue
  • The GST is a consumption tax, so any difference of tax rate should only be intended to protect the consumption basket of poor.
  • Also, the 28% tax rate is considerably higher than what any other developing countries levy and so in this regard the number of goods kept in this bracket should be as minimal as possible – consisting of no services and only demerit goods such as ACs and luxury cars
  • As a corollary, the pressure by the states to keep more and more goods in the lower brackets of 5% and 12% should also be resisted as that puts pressure to add more goods to the basket of 28%
  • It is desired that a majority of the goods and services be taxed at 18%, so that the distinction between goods and services, for tax purposes, is made redundant. Tax authorities should not be burdened with distinguishing a good from a service.
  • Industries such as textiles, leather-based should be charged uniform tax rates across their entire value chains. – from raw materials to intermediate to final goods
  • Gold and jewellery should be considered a luxury item and be charged 18% tax-rates. Today, even though the total headline tax on jewellery is 2% (1% by the centre and 1% by the states), the effective burden faced by consumers is about 10-12% because of cascading and non-availability of input tax credits. So there would be no increase in burden if the GST rate is set at 12% (with free flow on input tax credits). 
  • Bidis should be treated at par with other tobacco products and be taxed heavily.
  • Currently, numerous exemptions are granted on countervailing duty (CVD) and special additional duty (SAD) levied on imports which favour imports over domestic production. Under the GST, both will be combined and a uniform IGST will be applied on imports.
  • If any import IGST exemptions are allowed under the GST (to mimic the current CVD and SAD exemptions) that would make a mockery of the Prime Minister’s Make in India initiative.
  • GST suffers from weaknesses largely related to the exemption of so many items from its scope: alcohol, petroleum, electricity, land and real estate, health and education.

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