GST Conclave: Why Rates Not Rationalised Earlier? Sanjeev Sanyal Answers

The rationalisation in goods and services tax could have always been done earlier, according to Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister.

At the NDTV Profit GST Conclave on Tuesday, he explained that rates were not rationalised right after Covid-19 because the fiscal system was not strong enough then.

"We began looking at GST rate rationalisation seriously a year ago. When you reduce rates and rationalise them, there will be a one-time reduction in tax collection," Sanyal noted.

On cement, which was taxed at 28%, he admitted it was not due to "some great thinking, but because it was least disruptive". He added that earlier debates even went down to "whether to tax salty versus caramel popcorn".

"With rationalisation, common sense will broadly be able to tell you what falls under which slab," said Sanyal.

Sanyal pointed out that "inspector raj had come back into the GST registration process", but the framework has now been cleaned up. He also underlined that the government has both fiscal and monetary space to support the micro, small, and medium enterprises.

On external trade, Sanyal said India's deficit with China "had been an issue for a while", but "we cannot wish China away". Even if India wants to become an industrial power, he argued, inputs will continue to come from China.

Looking ahead, Sanyal said that on policy, "the bulk of big structural changes are probably done". "What is needed now is half-a-dozen structural reforms, but a thousand process reforms."

He also flagged capacity gaps in critical areas — from cybersecurity and food safety to archaeology, museums and municipal governments. "We have 3,600 gazetted officers in the GSI (Geological Survey of India) — way too much for an institution, which should be slim and trim. The Union government is not bloated, I believe it is much smaller than it should be," he said.

Sanyal raised concerns over demographic shifts, saying states with low birth rates have started to complain about migration-led changes from the north. He urged policymakers to start thinking about how to ramp up birth rates in states and pockets where they are slowing.

"We need to shut down all population control programmes, which seem to hang around in our bureaucracy. We still have incentives for doing hysterectomy and tubectomy. Fine with women making their own choices, but a government incentivising such processes is something that needs to be thought about," he added.