Tax Tool Should Push Economic Growth

By Nantoo Banerjee

The BJP-led NDA government’s hard work for over two years to get India’s constitution amended to introduce a four-tier goods and services tax (GST) from July 1 now facing new problems at the hands of rules-happy babus in the central board of excise and customs (CBEC). The framing of rules post-GST gives an impression the universal GST principle is getting diluted. GST in India is not becoming a truly industry-friendly indirect-tax made-easy to expand its reach and induce producers, importers and service providers to push economic growth. For long, India used a tax tool — both indirect and direct — that rewarded tax evasion and black economy expansion.

Although over the last two decades, India’s direct tax system has been substantially rationalised to emerge as one of the most potent systems in the world, the babus in the CBEC continued to hold their grip on the indirect-tax collection system. As a result, the government’s revenue from excise and customs duty, which once formed the biggest chunk of gross annual tax collection, started losing space to direct tax kitty. Soon, the direct tax collection surpassed the revenue from indirect taxes. Also, imports became more attractive than domestic production.

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