India should progress toward a single, low-rate GST
which will help in making the domestic industry globally competitive.
“As long as an ideal GST is rolled out, there will be revenue shortfall in the initial years. It can be treated as an investment that is required for obtaining fundamental progress. The long-term benefits of GST is so large. The most important thing to focus on is a low, single-rate, and simplicity,”
India is yet to realise the full potential of the indirect tax reform as petroleum, electricity and land are kept out of GST and the government had to suspend several features of the new indirect tax to make compliance easy for the vast majority of small businesses and traders.
With GST revenue collections remaining below target, central and state government officials are now reviewing the GST structure for a potential revamp.
Kelkar said that in emerging economies, the way tax is administered on the ground, in effect, is the real tax policy. “If the administration is not capable, keep the policy simple. A single-rate GST, with a low rate, where the administration has low powers of investigation and punishment, is the way to go,” he said.
low rate of GST would be administratively simple and would offer the lowest incentives for tax evasion. At this low rate, it would have been possible to avoid all exclusions
Kelkar and Shah also propose that urban local bodies should be given more resources and freedom for their functions as decentralization would yield rich dividends in development.
Shah said, in the interview, that the state should foster freedom, innovation and creativity of private persons rather than having centralized planning and a socialist vision under which the government tries to engineer society, and tells everyone what they should do.
“We need to harness the energy of private people. We should create conditions for the flowering of individuals.
The federal foundations of the Constitution of India put us on the right track, towards a world where each village and each city is the master of its own destiny, and not looking up waiting for guidance or orders or single national systems,” said Shah.