Fifteenth Finance Commission Chairman NK Singh on Friday came out against the frequent tinkering with the Goods and Services Tax (GST) rates and called for eliminating the cumbersome compliance procedures to improve tax collection.
He also argued for a more credible policy for rationalisation of Centrally Sponsored Schemes and central outlays, and said the “role of NITI Aayog, which is primarily a think tank institution and not a financial body, remains somewhat unclear in the financial sphere”. “The cumbersomeness of compliance is one of the important factors why I believe that there is a huge scope for improving the revenue realisation from GST.”
“Equally, I do believe the frequency with which the rates have been changed is unbelievable. You are playing with the rates of taxation, these are serious issues and these are not rates of mutual accommodation,” he said, after delivering the LK Jha memorial lecture at the RBI headquarters here. GST revenues stood at Rs 95,380 crore in October 2019, lower than Rs 100,710 crore in October 2018.
Need for symmetry between GST Council, FinComm
At a time when GST revenue numbers are moving downwards, the Finance Commission chief has raised concerns about the frequent tinkering of rates and has flagged the need to go back to the drawing board for the indirect tax regime. He also pointed to the need to restructure the GST Council and focus on the symmetry between it and the Finance Commission. Though rates fall under the purview of the Council, any sort of extension in compensation structure for states beyond the guaranteed period till 2022 will have a crucial bearing on the Commission’s recommendations.
“If you do not simplify GST, you will be defeating the very purpose and intention of why we took this far reaching step,” Singh said in response to a question by SBI Chairman Rajnish Kumar. However, Singh noted despite all these issues, the country has seen one of the fastest GST adoption rates and credited same to the PM and former FM Arun Jaitley, but stressed on the need to go back to the drawing board urgently.
“The symmetry in the working of the GST Council and the Finance Commission deserves serious considerations … I think the GST Council needs a restructuring in terms of what is good, not only in terms of the negotiating strengths of one state versus the other, it needs to function in a manner so that the rims of India are not really seriously compromised,” Singh said.
“We need a far more credible policy for rationalisation of Centrally Sponsored Schemes and central outlays that have been possible so far. Several committees in the past have made attempts to do so but the outcome has been elusive. This is even more relevant since the role of NITI Aayog, which is primarily a think tank institution and not a financial body remains somewhat unclear in the financial sphere,” Singh said.
“We need to constitute an empowered group of domain experts to submit to the Finance Minister and Prime Minister on modalities of further and deeper rationalisation of these Centrally Sponsored Schemes,” he said. With the abolition of the Planning Commission, many economists and policymakers have argued about an institutional vacuum, he said. “While the NDC is performing an important function, the States have pleaded for a credible institution acting as a link for a policy dialogue with the Centre,” Singh said. He added aligning the fiscal and debt path of the Centre and states is an arduous but inescapable task.
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