Protecting revenue

GST may need further reforms

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The Union government this week introduced two Bills in Parliament to enable it to impose taxes on select sin goods. In a way, this is a logical step forward after the rationalisation of rates in goods and services tax (GST).

In September, the GST Council had decided to move broadly to a two-slab system of 5 per cent and 18 per cent. Besides, select sin and luxury goods were put in the 40 per cent tax slab. The adjustment also ended the compensation cess on most items, except sin goods, on which it was retained to repay the remaining debt incurred to compensate states for the revenue shortfall during the pandemic. As the debt gets fully repaid, the new Bills will ensure that taxes on sin items do not decline.