This refers to A K Bhattacharya’s column “Towards an Indian GST Regime” (New Delhi Diary, April 29). I agree with the author’s conclusion that it would be wiser for the finance minister to make a beginning with an imperfect Goods and Services Tax (GST) with all its flaws and improve it later. But I do not agree with his acceptance of the views of some experts. They talk vociferously about the imperfections in the Indian GST, but cleverly hide the fact that GST in big federal countries all over the world are equally imperfect and even more. The one in Brazil is so imperfect that it has been described by economists as a “patchwork quilt”. Even the European Union’s value added tax (VAT) has structural flaws, leading to reports of large-scale cash purchase and evasion, particularly in poor countries. The best of the lot is Canada, but even Canada has not subsumed the sales tax and every state charges sales tax at different rates, apart from the central GST of 7 per cent. India has been able to subsume sales tax, which is a huge achievement.
Much is said about not including petroleum, which has a high share of revenue. But judging the impact by a percentage of revenue misses the macro-economic view. Petroleum is a bulk commodity, traded in bulk. Not including it in GST will not adversely affect the common market that will be achieved for general merchandise such as raw material and machines. With VAT and central value added tax for petroleum, a parallel VAT system can be made operational. To say that if petroleum is not included, it is no GST at all. It is a figment of high-flying imagination.
Regarding the inclusion of real estate in GST, it is a bad idea. Real estate is neither a good nor a service. And it is prevalent in a few countries only and not generally acceptable.
The proposed Indian model will achieve many things, namely (a) one rate of duty, (b) abolishing the distinction between goods and services (c) abolishing the big fat excise tariff and (d) doing away with the concept of manufacturing. It will simply be a great tax for celebration by trade and industry.