Some Problems With the Indian Goods and Services Tax

Abstract

The objective of this essay is to examine and explain possible drawbacks of the goods and services tax (GST) introduced in India on July 1, 2017. To get a comparative picture of its vulnerability to tax evasion, data for the OECD countries in the 1990s and also the Indian state VAT earlier this decade are first looked at. The tentative conclusion buttressed by recent newspaper stories is not encouraging.

The essay goes on to raise doubts about the suitability of the GST for India. This is followed by a look at the complex structure of the Indian GST which can result in negative GST rates for some goods or services. The coordinated examination and reform of India’s Central and state GST administrations, overseen by the GST Council is then discussed. It is pointed out that the reforms are still ongoing despite over a year having elapsed since GST was introduced. Some key pending reforms are identified.

Keywords: Value Added Tax, Goods and Services Tax

JEL Classification: E62, E63