Still not packaged well: GST adds to manufacturing woes, calls for simplification grows

• Proposed Tax Rates on Popcorn: The GST Council proposed different tax rates for popcorn based on its sugar or salt content: 5% for popcorn mixed with salt and spices, 12% for prepackaged and labelled popcorn, and 18% for caramelised popcorn. This move has faced criticism for complicating the GST system, which was intended to be straightforward.
• Criticism and Complexity: The proposal has been criticized for adding complexity to the GST system. Former Chief Economic Advisor Krishnamurthy Subramanian described it as a “bureaucrat’s delight and citizen’s nightmare,” highlighting the growing complexity of the tax system that businesses find burdensome.
• Economic Slowdown and GST Collections: The November GST data showed lackluster growth in key manufacturing states, with some states experiencing negative growth. This slowdown is attributed to lower domestic consumption, high business costs, and the complexities of the GST system, affecting overall economic activity and GST collections.
• Need for Simplification: Experts suggest simplifying the GST framework to improve compliance and ease of doing business. Simplification could include reducing the number of tax rates, removing exemptions, and implementing a flat rate. This would encourage more MSME participation and potentially boost GST collections.
• Encouraging MSME Participation: Simplifying the GST system is crucial to encourage MSMEs to participate in the tax system, which would broaden the tax base and enhance revenue collection. A single quarterly return and lower GST rates for small-scale businesses could reduce the financial burden and administrative complexities, improving compliance and contributing to economic growth.

Source A2ztaxcorp

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