Everyone loves a good GST: Politicians understand the flaws in system
India’s Goods and Services Tax (GST) system is facing structural challenges that are affecting growth, investment, and exports. The current design, with multiple tax rates, exemptions, and disruptions in input tax credit (ITC), has reduced the efficiency of the system.
The idea of GST was originally conceived as a simple, efficient tax system, but compromises made during its implementation diluted its core principles. These compromises were necessary to achieve political consensus, and all political parties were involved in shaping the current structure.
Over time, there is now broad agreement among policymakers that GST needs reform. A more effective system would include a single low tax rate, a wider tax base, seamless input tax credit, removal of cesses, and zero-rating of exports.
However, the present GST framework has become complex due to multiple slabs, exemptions, and restrictions in ITC, leading to cascading effects and reduced simplicity.
Experts believe that instead of incremental changes, a comprehensive political discussion is needed to redesign GST and improve its functioning in line with its original vision of being a “good and simple tax.”
