If the GST Council and the government have their way, we could see a sharp spike in GST rates across the board. The Council also wants new services to be brought under the ambit of GST and also encourage the states to increase the cess on items like fuel to increase revenues. While it may look like the government does not have a choice, there are some options that the government must look at from a longer term perspective.

At the outset, falling GST revenues are a major worry. But, that was the risk in the system that was well known. The focus should still be to keep rates low and encourage greater compliance by simplifying the on-boarding and the GST filing system. The Councils still does not have a foolproof method of preventing slippages with a proper ITC mechanism in place. So, cascading is still a big issue. The idea must be to hold rates and simplify the process. That is likely to be more productive for Indian business; more so at a time when the September quarter GDP growth has fallen all the way to 4.5%.