Bibek Debroy, Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM), stated on Tuesday that the government is experiencing a loss of revenue due to the Goods and Services Tax (GST) system. He emphasized that the GST should have a single rate to maintain revenue neutrality. Speaking at an event hosted by the Calcutta Chamber of Commerce, Debroy acknowledged that while GST has simplified many aspects, the ideal approach would involve a singular tax rate for neutrality.
Debroy explained that the initial intention behind GST was to be revenue neutral with a single rate, and the Ministry of Finance estimated a necessary average GST rate of at least 17% to achieve this neutrality. However, the current average GST rate is 11.4%, leading to a revenue loss for the government. He highlighted that while the desire exists to reduce the 28% tax rate, no one wishes to increase the rates of 0% and 3%, which poses a challenge to simplifying the GST system.
Debroy also addressed issues surrounding GST, noting instances of misuse of its provisions without providing further details. Shifting his focus to direct taxes, he advocated for comprehensive tax reform with the ultimate goal of eliminating all exemptions. According to Debroy, exemptions only complicate matters, escalate compliance expenses, and contribute to legal disputes.
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