Why parties should ensure tax revenues are properly spent, rather than raising allegations
GST is never far away from the news-and not just when the GST Council meets. Just the other day a political party held simultaneous press conferences across the country to hurl epithets at the tax — the alphabets lending themselves to very many imaginative expansions. The charges were not new and have been addressed several times in the past — but since they have been repeated, they need to be addressed once again to set the record straight.
Why are both the poor and the rich paying the same amount of tax? This raises the question of whether the tax system is fundamentally flawed; Why are there multiple tax rates? For instance, the now-infamous example of the popcorn tax was mentioned; The argument being made is that there should be a single, flat tax rate.
An old Oxfam report from January 2023 (without attribution) was cited to suggest that 3% of the total taxes collected from specific food and non-food items comes from the bottom 50% of earners. This, the report claims, highlights the tax's regressive nature and its negative impact on the poor.
It was suggested that the contribution of indirect taxes is more than direct taxes while it ought to the other way around; that this has happened because of the 2019 reduction in corporate tax. The evasion under GST has also been substantial with cases of evasion of up to Rs.2 lakh crore having been detected.
The allegations suggest that states have no say in the GST Council, which is controlled by the Centre, and that they are losing revenue due to GST. Additionally, the Cess component has increased dramatically over the years, with the revenue not being shared with the states. The demand is for a new, simplified 'GST 2.0,' with a single, low tax rate.
