Evolving GST a Feature of Consumption Behaviour

When the Goods and Sales Tax (GST) regime was introduced by Indian Prime Minister Narendra Modi in July 2017, it had placed most consumer durables under the highest tax slab of 28%. A little over a year later, however, there has been much change and moving of products out of this slab to more accurately reflect the patterns of consumption in the country. The primary reason for these changes has been the fact that a great degree of stability has been achieved in the revenues that the government has managed to accrue during this period. However, there are concerns about how such changes will result in an estimated revenue loss of about 70,000-crore rupees.

Perhaps one of the biggest complaints against the constant changing of rates tat is still ongoing has come from opposition parties of the the Bharatiya Janata Party (BJP) in states where the changes have come on the eve of elections. Their claim is that pandering to populism is the sole motivation of the government as it presents their candidates in those states where they BJP looks to once again secure power, in a more favourable light. The most recent criticism comes in light of the fact that states such as Chhatisgarh, Madhya Pradesh and Rajasthan will be going to the polls in the coming months, and as BJP strongholds at present, the recent cuts will seek to consolidate its power in these states.

While the original implementation of the GST regime saw much hue and cry, mostly because although simpler than the Value Added Tax regime that existed before it, it was still complicated because of the five tax slabs that it imposed. Adding to this confusion seems to be the constant changes in the items that make up these categories. Yet, it may well be that the number of slabs are reduced as the system achieves a state of acceptance, and caters to multiple benefits for the government exchequer in the form of increasing revenues. Time will tell how much more simple and beneficial the system of taxes on goods and services will become, in the coming months.