Sanjeev Sanyal, economic advisor to PM Narendra Modi, at NDTV Profit GST Conclave.
- Sanjeev Sanyal explained GST as taxing each stage of production, not just the final product
- GST prevents cascading tax by spreading tax burden evenly across the supply chain, he said
- From September 22, GST will have two slabs: 5 per cent and 18 per cent
Sanjeev Sanyal, economic advisor to Prime Minister Narendra Modi, has explained the concept of Goods and Services Tax (GST) in simplified terms for the younger audience.
"Basically, what GST is, is that you don't get taxed from the final product, but on the entire chain," the economist said on Tuesday at the NDTV Profit GST Conclave.
Using the iPhone as an example, he explained to Gen Z and Gen Alpha how a product is built from multiple inputs before reaching its final form. "Lots of inputs go into an iPhone, and then you get the [finished product]. Now, instead of just taxing the iPhone at the end, what you do is, at every stage of that, when the inputs come in, you tax them in every stage," he said.
Why not just put all the tax at the end? That, Mr Sanyal explained, leads to what economists call "cascading".
"If you load all the taxes to the total, at the end, you will end up having something called cascading. So, if you cascade everything onto one point in the system, it causes too much overload on that system," he explained.
He described GST as a way of spreading out the tax burden evenly. "GST is essentially a way of levelling out that entire supply chain with the pressure of the tax, so that nobody in the system is excessively pressured by the cost of the government taking money from the system."
The conclave followed the latest GST reforms announced last week. From September 22, only two slabs will remain: 5 per cent and 18 per cent. A special 40 per cent "sin tax" rate will continue for luxury items and products like pan masala, cigarettes, and sugary or carbonated beverages.
The event hosted speakers, including Union Finance Minister Nirmala Sitharaman, Union Minister of Commerce and Industry Piyush Goyal, and Chief Economic Advisor V Anantha Nageswaran.
Mr Sanyal also said rationalisation in GST "could have always been done earlier," but it was delayed in the aftermath of the pandemic. "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," he said.
