Increase revenue by increasing GST rates: CEA

Former Chief Economic Advisor Arvind Subramanian has suggested that the Goods and Services Tax (GST) Council should seriously consider increasing tax rates. He argued that this would not only improve tax revenue but would also eliminate the need to impose a new levy once the compensation cess expires.

He said at a conference ‘my own view is that compensation cess should not be introduced afresh because it has created a moral hazard. So if the Finance Commission is asked to make arrangements, compensation for it, then this is also a kind of moral hazard. The solution is to increase rates, increase revenue and reduce the need for compensation.’

He said that India’s GST system was adopted in 1 July 2017 and the goal of GST was to streamline the tax structure of India. This system is still very complex. It needs to be simplified.

Subramanian said, ‘The GST system is very complex. There are 50 (different) cess rates right now. If we look at other things, these rates can increase to 100.’

He expressed concern over the ever-increasing excessive tax demand in GST in recent years and termed it as ‘tax terrorism’. He stressed that there have been tax-related issues in the Indian system but after the implementation of GST, such issues have increased significantly. According to him, the goal should be to solve this problem.