14-July-2025 Daily Answer Writing
Q1) Discuss the significance of GST rate rationalisation and the challenges in building consensus for reform among states.
(GS Paper 3, 10 Marks, 150 Words)
Answer:
The Goods and Services Tax (GST) regime, launched in 2017, was a landmark reform aimed at unifying India’s indirect tax system. However, the existing structure with multiple slabs and compliance complexities has led to calls for rationalisation. The recent push by the Home Minister to initiate consensus-building discussions highlights the political and economic importance of this reform.
Need for Rationalisation
- Simplification of tax structure: Multiple slabs (0%, 5%, 12%, 18%, and 28%) create confusion and compliance burden.
- Improved ease of doing business: A streamlined rate system can enhance business confidence and investor sentiment.
- Revenue efficiency: Rationalisation could result in higher collections through better compliance and reduced litigation.
- Boost to consumption and manufacturing: A clear rate structure helps in planning, pricing, and investment.
Challenges in Building Consensus
- Divergence of interests: States fear revenue loss and are hesitant to shift to lower or merged slabs.
- Political differences: Opposition parties often resist Centre-led initiatives, complicating the GST Council’s unanimity-based decisions.
- Inflationary pressures: Rate shifts may increase the cost of essential goods, hurting public sentiment.
- Data divergence: The variability in consumption patterns among states creates disagreements over revenue-sharing.
Conclusion
- GST rate rationalisation is essential for a sustainable and robust indirect tax regime.
- However, political will, data-driven discussions, and compensation assurances to states are critical for building the required consensus.
Read More – 12 July 2025: Daily Answer Writing
