Adding to the GST Conundrum

Since its inception in July 2017, India’s goods and services tax (GST) has encountered over 400 orders and notifications, largely on grounds of complexities of execution. With the 2019 general elections on the horizon, both the Bharatiya Janata Party (BJP) and the Congress in opposition are pledging further modifications. While the BJP government has already rationalised the GST rates to 18% or below for 23 items out of the enlisted 40 broad categories, media reports divulge the Congress’s promise of yet another version of a simpler tax structure with (item-wise) wider coverage and a single rate, GST 2.0, in its 2019 electoral manifesto. But, what remains unclear is whether and how these modifications (executed or promised) will resolve the alleged complications fundamental to the GST. Various questions relating to critical issues, like India’s fiscal federalism, compliance and, above all, the future of unorganised sector businesses or small capital, are still pertinent or unresolved. 

There is nothing novel in tax reforms being used as floorboards for contesting elections. Malaysia’s case in recent times has shown that governments do not hesitate to rollback taxes to douse populist displeasure even when such taxes (read GST) constitute about a fifth of their revenue earnings. One would shudder to think of the costs of “rolling-back” the GST for India. One saving grace of the narcissism of the contending political parties (of being either the “daring” executor or the “innovative” conceptualiser of GST) is that it deters such retraction. But, parallelly, it entails a threat for the federal structure of the state polity.