TOWARDS A LESS TAXING GST

India's GST is still an incomplete story, as a large share of sales pertaining to petroleum products, agricultural products, electricity, and real estate remains outside its purview

- By D.K. SRIVASTAVA, CHIEF POLICY ADVISOR, EY INDIA

GOODS AND SERVICES TAX (GST) was introduced in India in July 2017 to improve both production and consumption efficiency. The pre-GST system of domestic indirect taxes was characterised by multiplicity of taxes, multiplicity of rates for the same tax, cascading of taxes, undue emphasis on the origin principle of taxation, and fragmentation of a genuine all-India common market.

However, GST 1.0 was only partial. Some important goods were left out of its purview, including alcoholic products for human consumption, electricity, and petroleum products.

It continued to have multiple rates, which also kept on changing through various GST Council meetings. A compensation cess, now discontinued, was introduced to facilitate the transition.

India's GST is still an incomplete story. A large share of sales pertaining to petroleum products, agricultural products, electricity, and real estate remains outside the purview of GST. In terms of revenue importance, the share of taxation of petroleum products and alcoholic beverages by central and state governments amounted to 60.8% of GST revenues, excluding compensation cess, in FY20. In FY24, this share was 50.8%. If we look at the share of value-added tax (VAT) on petroleum products and state excise duties in State GST (SGST) revenues, it amounted to 67.9% in FY24.