Moneycontrol PRO
you are here: HomeNewsOpinion

Moneycontrol Pro Panorama | GST: A simple, reliable tax still a distant dream?

In today’s edition of Moneycontrol Pro Panorama: A peek into Strategy Lab, ITC makes it to Weekly Tactical, wide canvas for Nazara, shock proof your portfolio and more

May 20, 2022 / 04:41 PM IST
Representative Image

Representative Image

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

The Goods and Services Tax is widely acknowledged as one of the most important reforms implemented in India in the past decade. However, almost five years since it was first introduced, the dream of a simple and reliable tax structure still seems far away.

What’s added to the muddle now is the Supreme Court ruling on a case which among other things made the point that the recommendations of the GST Council are not binding on the states and the central government.

Now, that might seem to be just a reiteration of what’s already there in the law. Revenue Secretary Tarun Bajaj said as much after the apex court judgment.


On the other hand, critics of the tax (or the way the tax has been implemented) say the order restores the power of the states. Finance ministers of states ruled by non-BJP parties have also welcomed the judgment and said it will boost cooperative federalism.

Where the Supreme Court judgment acquires significance is in the way the recommendations of the GST Council are implemented. So far, even if the states have had differences, they have stuck to the recommendations of the Council.

Now, some states may well be emboldened to step out of line since the recommendations are not binding. This threatens the concept of ‘one nation, one tax’, the most attractive selling point of GST that replaced a complicated indirect tax structure with multiple levies.

The ruling also comes at a particularly delicate time. The compensation cess arrangement — wherein states are compensated by the Centre for revenue shortfall —is coming to an end this year. This increases the scope for further friction between the Centre and states.

To be sure, in a huge federal democracy like India, there will always be teething troubles for complex laws, especially those involving revenue sharing.

But the apex court ruling should act as a trigger for the Centre and states to come together and work as one, not only to increase revenues, but also stop a potential flood of litigation that can act as a drag on the nascent economic recovery. A recovery in GST revenues in recent months is a welcome trend and the two can work together to build it up further.

Investing insights from our research team

Weekly Tactical Pick: ITC

Dr Reddy’s: Acceleration in EM opportunity to help re-rate company

eMudhra IPO: Promising business at an unfavourable valuation

Godrej Consumer Products: International business dampens the show

Nazara Technologies: Results cheer, solid growth potential

Lupin: Pricing erosion intensifies in US

Pidilite: Margin pressure to continue

What else are we reading?

Strategy Lab | Strategy back testing: Why you need it and how we can help

How to realign portfolios for changing times

Time to take stock after this week’s market volatility

Let the rupee depreciate

Sebi should clear the air on who can recommend model portfolios

What Infosys’s pay hike bonanza tells us about India’s IT services export model

Renault's, McDonald’s exit from Russia is significant symbolically but not materially

What are investors supposed to trust in now? (republished from the FT)

Technical Picks: Nifty, Persistent System, Steel Authority of India, ITC and Aluminium (These are published every trading day before markets open and can be read on the app)

Ravi Krishnan

Moneycontrol Pro


Ravi Krishnan is deputy executive editor at Moneycontrol
ISO 27001 - BSI Assurance Mark