Retain spirit of GST

A number of crucial decisions were taken in the last Goods-and-Services-Tax (GST) Council meeting aimed at making compliance a lot easier; but, at the same time, a lot of tinkering with tax rates was also done. In fact, tax rates were reduced on as many as 27 goods.
Typically, people rejoice when a government reduces tax rates. But, it begs a question as to why tax rates were
reduced on so many goods just after three months of GST implementation.
GST was such a monumental change that everyone expected that it would take a while before things stabilise. Therefore, three months is too little a time to change tax rates.
There could be justifiable reasons as well to reduce tax rates in some cases; but, even then, appropriate due diligence should have taken place before rolling out of GST on July 1 to arrive at realistic tax rates.
There is always a possibility that the central government may indulge in populism by changing GST rates frequently. And, this is what people should be careful about, especially when the inherent nature of GST, which is based on input-tax-credit, is really complex.
Consider this for an example. A lot of people have said that the GST Council may reduce the tax rate on AC restaurants from 18% to 12%. It looks good on paper, but sources have informed that the AC restaurants will not be able to avail of input-tax-credit, if GST rate is reduced to 12%.
This credit means that businesses can get their tax liability reduced to the extent of tax already paid by their suppliers. Due to this, even though an AC restaurant levies 18% tax on the bills; but, its actual tax obligation gets reduced by tax already paid by its suppliers.
If GST is reduced to 12% on AC restaurants without the provision of taking tax credit, it is possible that their actual tax obligation may increase, which can result in them increasing the prices of items on their menu.
It should be seen what each tax reduction actually means to the consumer. For example, people often ask the government to reduce tax rate to zero on certain products. What does this mean in the GST scheme of things?
It means that there will be no tax on the final sale of a product from a retailer to the end consumer. But, other taxes have already been imposed at several stages of manufacturing before the product reaches the retailer. With zero tax on final sale, retailer will not be able to take input tax credit, which means the final consumer may end up paying a higher price.
All in all, the central government must ensure that spirit of GST is retained and populism shunned while dealing with
tax rates.