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Day 29 – Q 2.Do you think the present GST tariff structure addresses the generally regressive nature of indirect taxes? Critically examine.

2. Do you think the present GST tariff structure addresses the generally regressive nature of indirect taxes? Critically examine.(Hint: Analyse this question from the perspective of GST’s success or failure in rationalising tariffs for goods and services used by the vulnerable sections i.e. poor, women, children, disabled etc)

क्या आपको लगता है कि वर्तमान जीएसटी टैरिफ संरचना कर की सामान्य प्रतिगमन प्रकृति को संबोधित करती है? समालोचनात्मक जांच करें।


Goods and Service Tax ( GST ) is a indirect, multistage, destination based tax introduced through  101st Constitutional Amendment and it replaced /subsumed the taxes like – Excise duty, Additional excise duty, Entertainment tax , Entry tax etc as it had envisioned ‘One Nation, one tax’


All though, tax is a mandatory financial charge or any type of levy imposed on a taxpayer to fund various public expenditures. While, Indirect tax was common to all sections of the society, irrespective of ones income levels, Direct tax is based only above a particular income level. Any kind of taxation should be based on the following “Principles of Taxation” –

  1. Adequacy: taxes should be just-enough to generate revenue required for provision of essential public services.
  2. Broad Basing: taxes should be spread over as wide as possible section of the population, or sectors of economy, to minimize the individual tax burden.
  3. Compatibility: taxes should be coordinated to ensure tax neutrality and overall objectives of good governance.
  4. Convenience: taxes should be enforced in a manner that facilitates voluntary compliance to the maximum extent possible.

The system of Indirect taxes in India was regressive , reflected inefficiency and was against the  principles of taxation as –

  • It did not consider economic status of a person and was same to everyone.
  • It was a heavy burden for the poor, who are already burdened due to their situations and facing the wrath of poverty & inflation.
  • It did not abide by the Socialistic principles in Indian preamble.
  • It had lot of differences across different states , leading to lot of ambiguities.

However, GST was considered to be a “Common Panacea”  for many issues  in Indian economy, it is considered to follow the principle of “Redistributive Taxation” , to disburden India’s poor and move towards a stronger economy. The incomparision with the earlier Regressive Indirect taxation , the GST introduced had the following benefits-

  1. Making the basic cereals (wheat,rice), pulses , oilseeds – tax exempted under the new regime.
  2. Creation of multiple slabs in GST and placing the regular products into smaller slabs.This could help in reducing the burden on common man for daily wage objects.
  3. Placing of high end products like luxury cars, tobacco products, foreign trips in higher tax slabs.
  4. Placing the essential commodities in the lowest tax slab.
  5. The women essentials like bindi, sindoor, bangles are kept out of GST.
  6. Charitable trusts, NGOs on a defined criteria is kept out of GST

Even though, GST has the above benefits – it is considered to not be a full proof solution and it is having the following obstacles in its implementation, which is not allowing it to achieve its full potential-

  1. Some essential products are placed in higher tax slabs,Eg- Sanitary napkins ( recently made tax exempt), cement ( for construction) etc.
  2. The complex procedure like e-filling, paperwork’s had introduced more burden  on small traders leads to high administrative cost, distortion cost & compliance cost.
  3. Complicated structure, due to Multiple Slabs – causing difficulty in Understanding .
  4. Certain sectors like real estate, petroleum products have been kept out of the preview of GST
  5. GST council may have populist agenda behind slabbing or de slabbing  which has created confusion.
  6. Awareness regarding the GST remains a main concern.

According to the Finance Minister, the short term effects faced in implementation of GST, is like  “Short term pains to achieve long term gains”  like-

  • Common man friendly
  • For Trade & Industry.
    • Common procedure for registration, duty payment, return filling , refund taxes
    • Seamless flow of Tax Credit.
    • It will help in eliminating the Cascading Effect.
    • It would lead to “Neutralization of Taxes”- to make exports more competitive.
  • For the Economy
    • It would lead to “Unified common market”
    • To make India a Manufacturing hub in the long run 
    • Boost investment and generate more employment.
  • Simplified Tax Structure in the Long term.


GST was considered to be the “Bullock Cart stuck in the mud”, the fact that it has been implemented finally is something to celebrate. It may currently have many obstacles and negative features, but “some faulty initial features may be essential  compromise to get it accepted in the first place”. Even with the negatives, the positives definitely outweigh the regressive Indirect Tax structure, pre GST in India.


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