Rationalised GST Rates: Key to India’s Growth and Jobs
India’s introduction of the Goods and Services Tax (GST) in 2017 marked a significant shift towards a unified tax system. Since then, the government has focused on simplifying GST to fuel economic growth and job creation. Recent discussions on GST rate rationalisation highlight the importance of a balanced tax structure to sustain this momentum.
🔄 Why GST Rate Rationalisation Matters
Union Finance Minister Nirmala Sitharaman has stressed the need for simplified tax structures and tech-driven reforms. The Group of Ministers (GoM) recently proposed changes aimed at boosting revenue while supporting business growth.
For instance, the introduction of a 35% GST slab for items like aerated beverages and tobacco could increase government revenue. However, these measures might also have unintended consequences, such as job losses and a rise in illicit trade.
🤝 Impact on the Aerated Beverage Industry
India’s carbonated soft drink (CSD) industry faces one of the highest tax burdens globally, hindering innovation and job creation. Over 90% of countries taxing sugar-sweetened beverages (SSBs) adopt lower rates. WHO and World Bank recommend layered taxation based on sugar content to encourage healthier products.
Despite India’s abundant resources like mangoes and sugar, the high tax burden limits the CSD sector’s growth potential. A 2018-19 study revealed that the CSD industry contributed ₹79,160 crore to the economy and created 6.91 lakh jobs.
📈 The Tobacco Sector: Balancing Revenue and Jobs
India’s tobacco industry supports 4.57 crore livelihoods, particularly in agriculture. Excessive taxation has led to a surge in illicit trade, making India the fourth-largest market for smuggled tobacco. Between 2013-2023, declining tobacco production cost the economy 23.8 crore man-days of employment.
Increasing GST rates may boost revenue temporarily but could exacerbate tax evasion and job losses.
🛍️ Tiered GST Rates for Goods
The GoM also recommended a tiered GST structure for 148 items:
| Price Range | GST Rate |
|---|---|
| Up to ₹1,500 | 5% |
| ₹1,500 to ₹10,000 | 18% |
| Above ₹10,000 | 28% |
While intended to simplify taxation, this structure could complicate billing for retailers, increasing administrative burdens.
🌐 Impact on International Trade
India’s GST system relies on HSN (Harmonised System of Nomenclature) codes for international goods classification. However, multi-tiered GST rates can create challenges for cross-border transactions. Simplifying GST could make Indian businesses more competitive globally.
💡 Case for Simplified GST
The NITI Aayog’s Trade Watch report highlights India’s potential to benefit from the “China Plus One” strategy. Simplified GST rates could position India as a preferred destination for investment and trade.
The legal gaming industry offers another example. High GST rates (28%) on player deposits have stunted sector growth. A balanced approach to GST can ensure public revenue while enabling businesses to thrive.
🚀 Towards a Balanced Future
To drive growth and job creation, GST reforms must balance revenue needs with ease of doing business. A rationalised GST structure can:
- 📈 Boost Investment
- 💼 Create Jobs
- 🌐 Enhance Global Competitiveness
By adopting flexible and simplified GST rates, India can unlock its economic potential and ensure sustainable growth for years to come.