The goods and services tax (GST) structure has been tweaked yet again, seemingly with an eye towards the general elections. While the move may or may not yield political dividends, it shows up the short-comings of the tax structure.
The GST Council has raised the threshold revenue for entities to come under the tax net, it has increased the threshold revenue for availing the composition scheme which allows businesses to pay tax in a simpler format and allowed Kerala to levy a calamity cess for two years.
Politically, it makes sense. The complicated structure of the GST with its high compliance costs has considerably hurt small businesses. It was implemented at a time when they were just recovering from the blow of demonetisation. Helping small businesses and traders — who make a good portion of the voter base — would thus give a political boost to the Centre. It follows other steps to revive the MSME sector in the last few months such as 59-minute loans and improving the flow of bank credit.