GST can be more successful only by reducing exemptions and slabs: IMF

The GST system in India is quite complex. About two-thirds of the countries implementing GST have only one or two non-zero rates. Harald Finger, Assistant Director and Mission Head of the India, Asia, and Pacific Department at the International Monetary Fund, said that reducing the number of non-zero rates as well as reducing exemptions will make the indirect tax system more efficient.

Finger believes that implementing a single GST rate can make it easier to follow and implement it. Along with this, the risk of theft can also be reduced. It has been seen in recent times that the product or service is classified incorrectly to take advantage of the low GST rate.

Along with this, he also suggested that if the increase in GST rate puts an economic burden on the weaker families, then they can be given financial help using the existing direct benefit transfer mechanism.

GST was implemented in India in July 2017. It has four slabs, many central and state taxes have been included with special rates for some items like precious metals. Cess is also levied on many items.

Many exemptions were given in GST from time to time, along with many roll outs. Due to which the GST revenue neutral rate of the initial 15.5 percent has fallen to 11.6 percent.

The GST Council has assigned the task of rationalizing the tax structure to a group of ministers. However, very little work has been done in this.

Harald Finger believes that even amidst global turmoil, India has a lot of opportunities to increase its growth potential through its structural reforms. Coordination with the states is also very important to rationalize tax reform.

However, he believes that the risk in the current Indian financial system is largely controlled. But wherever there are weaknesses, there is a need to improve them and be alert about them.

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