GST 2.0 Must Simplify Tax Regime With Two Slabs: Report

“Creating a 40 per cent slab, even for a narrow set of sin or luxury goods, will set a precedent for creeping expansion. Over time, more items will be drawn into this category, undermining the very purpose of simplification,” Think Change Forum, a think-tank said.

The report titled ‘GST 2.0: Two Slabs Today, One Rate Tomorrow', strongly recommended pegging the peak indirect tax rate, including cesses, to 18 per cent. “This will in one stroke remove anomalies such as inverted duty structures, cut down grey and illegal markets, reduce litigation and compliance burdens, and restore credibility to the GST system,” it said.

It is noted that the high-powered upcoming GST Council, chaired by finance minister Nirmala Sitharaman, comprising finance ministers of all states and UTs besides the Centre, will deliberate on the recommendations by the three GoMs on rate rationalisation, compensation cess and health and life insurance.

“The moderation of taxes is not a revenue sacrifice but a growth strategy. By reducing distortions, India can drive higher consumption, expand compliance, and over time generate massive tax collections to fuel its ambition of becoming a developed economy,” it said.

The report also pitched for transparency with regard to additional cesses and surcharges on luxury and demerit goods. “A cess rulebook with guardrails on when and how cesses can be levied, indexed, or sunset. This would bring predictability to tax planning and restore credibility to India's indirect tax regime,” it suggested.