Suggestions for GST Reform by Vijay Kelkar
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Suggestions for GST Reform by Vijay Kelkar
Subject: Economy
Section: Fiscal policy
- Single GST Rate:
- Kelkar suggests introducing a single GST rate system of 12% across the country.
- This move aims to simplify the GST structure, reducing complexity.
- Constitutional Amendment:
- He proposes a constitutional amendment for equitable sharing of GST proceeds.
- The sharing should include the Centre, States, and local governments like municipal corporations.
- Consolidated Fund for Third Tier:
- A constitutional amendment is also needed to create the Consolidated Fund for the third tier of government.
- Impact on Urban Governments:
- Kelkar believes that sharing GST with the third tier will strengthen the fiscal base of urban governments.
- It will also deepen democracy and governance at the grassroots level.
- GST Rate Complexity:
- Kelkar points out that the current plethora of GST rates has made the system unnecessarily complex.
- He emphasizes that many developed and emerging economies have found success with a single GST or VAT rate.
- Eliminating Differential Tax Rates:
- The traditional tax policy of having different rates for ‘must-have’ and ‘nice-to-have’ goods should be done away with, according to Kelkar.
- Previous Recommendation:
- The 13th Finance Commission previously recommended a single rate of 12% for GST during its award period of 2010-15.
- GST Revenue Performance:
- In March 2023, GST revenues reached the second-highest level of ₹1.78 lakh crore.
- This was notably higher than the monthly average collection of around ₹1.68 lakh crore in 2023-24.
- The average monthly collection for 2022-23 stood at about ₹1.5 lakh crore.
- Infrastructure Needs:
- Kelkar emphasizes the need for efficient infrastructure in the urban economy.
- Urban local bodies currently lack the fiscal base required for investments in high-quality public goods.
- Independent Secretariat for GST Council:
- He suggests the creation of an independent Secretariat for the GST Council.
- This move aims to ensure neutrality and unbiased support or advice to the GST Council.
Different rates under GST
