Govt losing revenue due to GST, says Bibek Debroy

Kolkata, August 22

Economic Advisory Council to the Prime Minister chairman Bibek Debroy on Tuesday said the government was losing revenue due to the GST, which should be revenue neutral with a single rate.

Speaking at an event organised by the Calcutta Chamber of Commerce here, he, however, said the GST has led to a lot of simplification.

“The ideal GST is one that has a single rate, and it was meant to be revenue neutral. According to calculations by the Finance Ministry when GST was first introduced, the average rate should be at least 17%. But, the existing rate is 11.4%. Because of GST, the government is losing revenue,” the eminent economist said.

Debroy said the public as well as members of the GST Council want the 28% tax rate to come down, but “no one wants the 0 and 3% tax rates to go up”.

“That way, we will never have a simplified GST,” he said at the ‘Special Session on Resilient and Self-Sufficient India’. A “lot of abuse” of GST provisions was taking place, he said without elaborating.

On direct taxes, the EAC-PM chairman said the eventual goal of tax reforms should be the complete elimination of all exemptions.

Any exemption makes life more complicated, increases compliance costs and leads to litigations, he said.

“If the government needs to spend, it needs revenue... 10% of GDP must be spent on health and education, 3% on defence and 10% on infrastructure. However, we as citizens pay around 15% of GDP as taxes. What this means is we pay taxes at 15%, but our demands and expectations from the government are to the extent of 23%,” Debroy said. — PTI

Average GST rate should be 17%

The ideal GST is one that has a single rate, and it was meant to be revenue neutral. According to calculations by the Finance Ministry when GST was first introduced, the average rate should be at least 17%. But, the existing rate is 11.4%. — Bibek Debroy, Chairman, Economic Advisory Council to Prime Minister

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