New Delhi: The Center has sacrificed a large chunk of Goods and Services Tax (GST) revenue, up to 1 per cent of GDP, every year since the implementation of the new indirect tax regime to fund a 14 percent compensation guarantee. percent provided to states, former chief economic advisor Arvind Subramanian said on Thursday.
Subramanian, who was actively involved in the implementation of the GST regime, also said that it would not be advisable at this time to include petrol and alcohol in the GST.
The GST was implemented on July 1, 2017, subsuming 17 taxes and 13 cesses into a 5-tier structure, thereby simplifying the tax regime.
At an event organized by the Center for Social and Economic Progress (CSEP), Subramanian further said that the GST is a notable reflection of cooperative federalism and a counterexample to the Centre's narrative of fiscal centralization in the last decade.
Subramanian, currently a senior fellow at the Peterson Institute for International Economics, said the GST has largely worked along expected lines to benefit poorer states.
"The Center has lost between 0.5 and 1 per cent of GDP in revenue every year in the last seven years," he said, adding that bringing the tax to a rationalized rate structure can ensure that compensation is not necessary. in the future.
The eminent economist noted that GST revenues have returned to the pre-GST level, despite rate cuts showing that collections have improved and indirect taxes have become a little more progressive.
Subramanian further said that reforms in the GST structure are deeply necessary but highly unlikely to happen.
"What could have been done at the time of founding...GST rates could have been simplified at the time of founding," he observed.
On bringing alcohol and petroleum under the GST regime, Subramanian said: "I don't think it is politically advisable now to push states to give up more tax sovereignty."
The GST compensation tax has been suspended after the financial year 2021-22.
Gross GST collection rose 8 per cent to Rs 1.74 lakh crore in June.
The GST contributes significantly to state revenue: states receive 100 percent of the SGST collected in that state, approximately 50 percent of the IGST (i.e., from interstate trade). A major portion of CGST (42 per cent) is transferred to states as per the recommendations of the Finance Commission.
Subramanian, who was actively involved in the implementation of the GST regime, also said that it would not be advisable at this time to include petrol and alcohol in the GST.
The GST was implemented on July 1, 2017, subsuming 17 taxes and 13 cesses into a 5-tier structure, thereby simplifying the tax regime.
At an event organized by the Center for Social and Economic Progress (CSEP), Subramanian further said that the GST is a notable reflection of cooperative federalism and a counterexample to the Centre's narrative of fiscal centralization in the last decade.
Subramanian, currently a senior fellow at the Peterson Institute for International Economics, said the GST has largely worked along expected lines to benefit poorer states.
"The Center has lost between 0.5 and 1 per cent of GDP in revenue every year in the last seven years," he said, adding that bringing the tax to a rationalized rate structure can ensure that compensation is not necessary. in the future.
The eminent economist noted that GST revenues have returned to the pre-GST level, despite rate cuts showing that collections have improved and indirect taxes have become a little more progressive.
Subramanian further said that reforms in the GST structure are deeply necessary but highly unlikely to happen.
"What could have been done at the time of founding...GST rates could have been simplified at the time of founding," he observed.
On bringing alcohol and petroleum under the GST regime, Subramanian said: "I don't think it is politically advisable now to push states to give up more tax sovereignty."
The GST compensation tax has been suspended after the financial year 2021-22.
Gross GST collection rose 8 per cent to Rs 1.74 lakh crore in June.
The GST contributes significantly to state revenue: states receive 100 percent of the SGST collected in that state, approximately 50 percent of the IGST (i.e., from interstate trade). A major portion of CGST (42 per cent) is transferred to states as per the recommendations of the Finance Commission.
