GST@8: Faith restored, but rationalising rates remains a challenge, says Tarun Bajaj
As the Goods and Services Tax (GST) completes eight years since its rollout, former Revenue Secretary Tarun Bajaj says the tax regime has achieved broad acceptance, but critical challenges around rate rationalisation, input tax credit (ITC) blocks and the future of compensation cess remain unresolved.
“Ideally, we should reduce four slabs—5%, 12%, 18%, 28%—to three. Say, 5%, 12%/18%, and 28%, or some other configuration,” Bajaj told CNBC-TV18, while cautioning that any attempt to rework slabs would be politically and fiscally complex.
“If you retain 5% and 18%, the gap is too wide, and pressure will build to shift items to 5%. But if you shift too many to 5%, input tax credit (ITC) gets blocked. That causes cascading.”
He warned that inverted duty structures—such as in textiles and apparel—could worsen with any attempt to reduce rates arbitrarily. “If you move them from 12% to 5%, the problem gets worse,” he said, adding that these choices would require strong negotiations between the Centre and the states.
“Those moving to lower tax rates will be happy, but those moving up will raise a ruckus. And the political executive has to manage that noise.”
Consensus, not coercion
Bajaj emphasised that the GST Council cannot push through such changes unilaterally. “Even if two states strongly oppose something, you have to convince them. You can’t bulldoze decisions… That’s how the Council has worked—with time and consensus, and the backing of industry associations like FICCI and CII.”
