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Go one better: GST’s ambit should cover real estate and alcohol to fight black money
The Times of India  |  May 31, 2017

TOI Edit in TOI Editorials

The progress of legislative activity to roll out Goods and Services Tax (GST) has been hailed &ndash and rightly so &ndash as an important step in India’s economic transformation. It was helped by the willingness of all political parties to prioritise long-term good over expediency. Unfortunately, that is not the entire story. GST would have been better if real estate and alcohol had been included in its ambit. GST represents not just an economic reform, but also a step that will lead to formalisation of Indian economy. This is a pre-requisite to win the battle against black money.

 

Real estate has been identified by tax authorities as a significant repository of black money. Therefore, bringing the entire chain of real estate transactions, including sale of land, under GST is essential to provide an economic incentive to stakeholders to create an audit trail. Instead of using heavy-handed measures to fight black money, GST represents a sophisticated way to catalyse self-policing. Similarly, alcohol has for long been a source of crony socialism. State administrations impose tight controls over the business, including its distribution. This inevitably results in corruption.

 

It is not too late to change the situation. From the Centre’s side, chief economic adviser Arvind Subramanian has repeatedly pointed out these flaws. AAP has pitched for the inclusion of real estate in GST. They need more support from India’s larger political parties. Current tax architecture does not encourage transparency, which leads to attendant problems such as black money. The way out is simplification and standardisation of laws, which should not have too many loopholes. This will encourage transparency in economic transactions. GST represents a tool that can bring about this change.

 

This piece appeared as an editorial opinion in the print edition of The Times of India.