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As India enters the final countdown phase of GST, the key objective of the much-talked about tax legislation would be to improve the ease of doing business and achieving revenue goals, asserted leading economist Parthasarathi Shome.
“We are in the final countdown for GST. It is less than a perfect reform. We need it and we are going ahead with it. But the basic question is not that. Are we easing business operations, are we enabling entrepreneurs to produce more and are we doing enough to catch the corrupt from the taxpayers’ side?
“Until we achieve that, we will be a fledging economy and we will under-achieve our true potential,” Shome, former adviser to the Finance Minister in the previous government, said while addressing a meeting at the Madras Institute of Development Studies.
Low rankingShome, who is also a Visiting Fellow at MIDS, quoting World Bank statistics, said the country’s ranking was poor on many key parameters, such as starting of business, dealing with construction permits, ease of paying taxes, enforcing contracts and resolving insolvency and cross-border trade issues.
“Since there is little accountability in tax administrators and policy-makers, we get away with all that,” he added.
He was driving home the point that the tax administration required to be made more efficient and the government should invest more in modernising tax administration.
“Our cost of collection, which is administrative expenditure in proportion to the total money collected (by officers), has come down from 1.36 per cent in 2000-01 to 0.6 per cent now.
“This is the lowest in the world. It means the government has not invested in tax administration and modernisation — either in infrastructure or in the modernisation of the department and improving the personnel,” he added.
He stated that without modernising the tax administration, it would not be feasible to double or even treble the number of taxpayers (about six crore now), going forward.
To meet the revenue goals under GST, the exemptions should be few, the general GST rate should not be impeded by too many accompanying lower rates, and the administration should be efficient and transparent with lower compliance costs. C Rangarajan, Chairman, Madras School of Economic pointed out that it would be definitely advantageous to move towards GST.
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