12 Jun Revolutionizing Tax: The Story of India’s GST
The Goods and Services Tax (GST) stands as India’s significant indirect tax reform, informed by global experiences but adapted to local needs. Initially, concerns loomed over revenue, yet post-Covid economic recovery saw remarkable growth, with FY24 collections hitting record highs. However, a comparative look indicates awaited expansion in the tax base. States, particularly, witnessed challenges, with most experiencing a decline in GST contributions to their economies. Key factors include the complexity of tax rates hindering compliance and issues with revenue distribution mechanisms like IGST. Reforming GST is imperative, especially from the standpoint of states’ fiscal autonomy. Suggestions range from simplifying rates to a three-tier structure or even a single rate, drawing from global examples.
However, any reform should be cautious not to exacerbate consumption inequality or inflation, particularly impacting vulnerable groups. Research in this realm is crucial, but hindered by limited data accessibility. The evolving nature of GST underscores the need for collaborative reform efforts, ensuring it aligns with India’s economic landscape while addressing concerns of all stakeholders, particularly the states.
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