India Needs To Simplify GST : IMF

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New Delhi : The International Monetary Fund ( IMF ) on Tuesday suggested for a dual rate structure as the present multi-rate structure and other features could give rise to high compliance and administrative costs.According to the annual report of the IMF, though the Goods and Services Tax is a “milestone reform” in India’s tax policy, a dual rate structure with a low standard rate and an additional higher rate on select items can be progressive and preserve revenue neutrality.

The GST is an indirect tax levied on the supply of goods and services in India. It came into effect on July 1, 2017. GST was launched in India on 1st July 2017, which according to the report, the important step of unifying and harmonising numerous indirect taxes across all states of the federation and the central government.

“Yet, the GST has a complex structure with a relatively high number of rates (and exemptions), which could be simplified without sacrificing progressivity of the current GST and with potentially significant gains from lower compliance and administrative costs,” it said.The IMF said that with the consumption basket of the rich taxed at higher rates than that of the poor, the GST as presently designed has an effective tax rate rising with household consumption.

A revenue-neutral reduction in the number of rates would raise the effective rates for poorer households while reducing those for richer households. This is the key cost of moving to a simpler system, it argued.In its report the IMF said the implementation of the GST led to the key step of harmonising indirect tax rates on goods and services that previously differed across different states and the centre, and brought services into the state tax net.

Source : Tax Scan


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