GST-council in its 23rd meeting held in Guwahati de-facto confessed that the introduction of such an important tax-reform implemented in a hurry when it decided for an undesired Rs 20,000 crores annual revenue-loss by drastic cut in GST-rates for so many commodities. Economy is ruined where it is based on political requirements rather than on economic-principles. Reducing GST on rough industrial diamonds to just quarter-per cent from earlier 3 per cent is one such example. Significantly new rate-fixation is even now not done with an eye for a perfect GST-rationalisation for reducing too many tax-slabs.
With most essential items already under zero per cent tax-slab, best would have been to have just two GST-slabs of 12 and 24 per cent (with higher slabs in multiples of 48 to replace cess) abolishing 5, 12 and 28 per cent tax-slabs. It would have resulted in GST on service sector to be reasonable 12 per cent rather than presently excessive 18 per cent. In present scenario, 18 per cent GST on individual service-providers effectively results in combined tax of 48 per cent including 30 per cent Income-Tax thereby nullifying theory of reasonable tax-rate for automatic and voluntary tax-compliance.
It is senseless to have GST on uncommon postal-articles like post-cards at 5 per cent while for commonly used Speed Post at 18 per cent. Two-slab tax-regime of 12 and 24 per cent would have resulted in 12 per cent uniform GST on all postal articles and services.
(The views expressed by the author in the article are his/her own.)