The new Goods and Service Tax (GST) which is going to be rolled out on July 1 should ideally have only two slabs, rather than multiple slabs, according to Ajit Ranade, Chief Economist, Aditya Birla Group. Speaking on GST, Ranade said that according to the GST Council, India now has 1800 Indirect tax slabs which will come down to six slabs – 0 percent, 5 percent, 12 per cent, 18 per cent, 28 per cent and 43 per cent which is a huge progress. But according to him, there should have been only two slabs – 5 per cent and 12 per cent as originally suggested by the Kelkar Committee.”
The GST which marks a shift of the current indirect taxation system from a production-based one to consumption-based has great potential to boost the country’s GDP or national income, he said.
For this GST reform to prove efficient, it is important that there is a reform of the direct tax regime too, Ranade said. “Direct taxes in their very nature are proportional to an individual’s income. Whereas everyone regardless of their incomes, have to pay the same amount of indirect tax. Therefore, the pinch of indirect taxes on a poor man is much more than that on a rich man,” he said at the event organised by the Observer Research Foundation.
“Indirect taxes are inherently regressive, unjust and unfair and in India 65 per cent of the revenue comes from Indirect taxes and only 35 per cent of revenues comes from direct taxes. We need to fix this ratio and try to make it at least equal. Bringing about a reform in indirect taxation system is only half job done,” said Ranade.