GST Council must realise that lower rates lead to better compliance

The finance minister, as the Council's Chairperson, must convince states to bring more items down from the 18 percent and 28 percent slabs.

The Finance Minister said last week that India needs to widen its tax base in order to boost collections because a wider tax base would lead to increased collections and an eventual reduction in tax rates.

But could it be the other round? Would not lower tax rates drive increased compliance and higher collections, ie, the good old Laffer curve?

Indeed, lower tax rates will also address the other major problem: subdued consumption expenditure by households and the return of cash. The two are in fact related. 

Even the most willing taxpayer is avoiding paying almost 20 percent more for