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Suggestions for GST Reform by Vijay Kelkar

  • April 9, 2024
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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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

economy Suggestions for GST Reform by Vijay Kelkar

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