Over the last few months, there has been a national debate on corruption and different ways of tackling it. Fortunately, this time, there seems to be a sense of purpose in the discussions rather than a thought around 'learning to live with it'. Amid the flurry of activities that have taken place, the discussions around few other important and potentially-radical reforms such as implementation of the goods and services tax (GST) have taken a back seat, though the same can also be one of the effective ways of dealing with corruption. First, the GST would disincentivise growth of parallel economy. Given the multi-layered tax system with a narrow base of 'pass-through' taxes, the incentive to keep the transactions 'outside the books' is significant, particularly in some segments of industry. For example, if a real estate company were to purchase cement, steel, etc, from a supplier without recording the transaction, effective saving could be 20-25% (comprising 10.3% excise duty and 4-15% VAT).
Source : Economic Times
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