Niti Aayog member Bibek Debroy on Friday said the multiple rates structure under the Goods and Services Tax regime would be a key problem. However, the noted economist believes that the GST should be lauded as it is the “start of a process”, even if it is not perfect in its current form.
Speaking at the Aaj Tak GST Conclave on Friday, Debroy said the current GST is different from the originally proposed “ideal” structure, and that the multiple rates come from the “desire to tax” luxury items.
“Should I tax items that are perceived to be elitist at higher rates, or should I tax items of mass consumption at lower rates? I personally think, as an economist, we should not do that,” he explained.
According to the economist, the rates can be taken care of only through direct taxes and not through indirect taxes. “And one of the problems, which we have with the present GST, is the multiple rates,” he added.
However, Debroy claimed that the downsides of the GST were “somewhat exaggerated”, NDTV reported.
Earlier in June, Finance Minister Arun Jaitley had claimed that the introduction of the new tax regime will boost India’s GDP. In May, Revenue Secretary Hasmukh Adhia had said that the GST will add 4% to the country’s growth.
However, Debroy did not seem to agree with this claim. “When you see figures floating around, there will be a 1% to 1.5% increase in the GDP after the implementation of the GST. For God’s sake, that is utter rubbish,” he said, adding that he would not “contradict” the Union ministers.
The Asian Bank of Development on Thursday had also said that the multiple tax rates could pose challenges. Arriving at an effective pricing strategy in the GST era would be the biggest challenge for businesses, ABD President Takehiko Nakao had said, adding that the dual tax enforcement structure India has adopted – whereby both states and the Centre are in charge of enforcement – could be problematic, as well.