Simplifying India’s Goods and Services Tax (GST) system by reducing the number of tax rates, expanding its base, and leveraging digital tools could be a transformative step in addressing inefficiencies, economist and former member of the 14th Finance Commission M Govinda Rao has said.
Rao also underscored the critical need for fiscal reforms to bolster the nation’s tax-to-GDP ratio and support its developmental ambitions.
“India’s tax-to-GDP ratio is 16.5 percent, which is significantly lower than the 19-20 percent seen in developed nations. This needs to increase substantially. Simplifying the GST with fewer rates, backed by digitisation and AI, can play a pivotal role,” Rao said, emphasising that GST reforms are vital to addressing tax evasion and litigation issues. He was speaking at the Skoch Summit on ‘New Dimension in Inclusive Growth’.
India’s GST system is among the few globally with multiple tax rates, leading to complexities, misclassification, and potential dishonesty, Rao pointed out.
