Enhancing GST's robustness

24 OCT,2022 | MEDC


India's GST is a finely engineered taxation system, but design issues have limited its effectiveness. Rates of 18% and 28% are unacceptably high, and some see the piling of the latter atop a 42% income tax as one of the highest worldwide. To enhance GST's efficacy, it needs further rationalization. The solution to several socioeconomic issues we face today lie in developing a sound indirect tax system, revolving around a robust GST. India has the potential to be a global manufacturing hub, but sorting out the administrative and policy aspects of GST (which are a key determinant of overseas investment) is necessary. GST is a consumption tax, and its optimal architecture will incentivize the improvement of fiscal prudence. It would facilitate borrowing to build public infrastructure, as the increased consumption at future dates would pay for its debt-servicing. Streamlining GST should be a policy priority.

*Picture Credit: Google

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