Fixing GST

India needs a simple and stable tax structure

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The goods and services tax (GST) system is set for an overhaul in the coming weeks. It has been reported that Union Home Minister Amit Shah would initiate discussions with different stakeholders to resolve pending issues. If true, this reflects the political urgency to improve the GST system through a consensus between the central government and states. Another news report last week showed that the Prime Minister's Office had given in-principle approval to the restructuring of the framework. The Union government's intention to adjust the GST system to improve its workings should be welcomed. It, however, must be noted that while GST has enabled the creation of one national market as intended, it has underperformed in terms of revenue collection, which has particularly affected the Union government's finances. Unlike states, the Union did not have the cushion of compensation for a revenue shortfall in the initial years.