13.11.2021- Public finance expert M. Govinda Rao calls for inclusion of fuel, power and real estate under the ambit of GST

M. Govinda Rao, former director, National Institute of Public Finance and Policy, has called for the inclusion of petroleum products, electricity and real estate under the ambit of the Goods and Services Tax (GST).

Prof. Govinda Rao was delivering the keynote address at the opening session of the international seminar on ‘India’s experience with GST’ organised by the Gulati Institute of Finance and Taxation (GIFT) on Friday. Pointing out that the time is ripe for reforms in GST, Prof. Rao urged the Centre to extend the GST compensation period by another three years for protecting State revenues.

After four years, the GST regime has not fulfilled promises, he said. ”It has a number of birth defects and fault lines, which need to be remedied. Of course, the reform is here to stay, and it is not possible to reverse the reform and we can't go back to sales tax regime now,” he said.

The multiplicity of tax rates was creating confusion, he said, suggesting that the rates should be limited to two instead of the present four.

Tax structure

The base of the tax structure is narrow due to the large number of exemptions, he said. Multiple rates have led to an inverted duty structure and classification disputes, leading to complications, he said.

He also drew attention to the ‘partial nature” of GST due to the exclusion of petroleum products, real estate and electricity. “It is important that the GST compensation period is extended by another three years at least when the reforms are rolled out,” he said.

“States are always vulnerable and you need to ensure their revenues. Most of the public services are delivered at the State level. They really need to have money. Whichever way you negotiate, extend it for another three years at least so that they have the assurance that whichever reforms they implement, they do not result in a loss to them,’’ he said.

Prof. Rao also underscored the importance of a robust technology platform in the smooth implementation of GST and the need for a capable analytics team. He also urged the Government to share GST data with independent researchers.

SOURCE: The Hindu


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