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Datanomics: GST rate-cut move chases push akin to the Laffer curve
Indivjal Dhasmana New Delhi
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Prime Minister Narendra Modi has announced a reduction in goods and services tax (GST) rates on essential items ahead of Diwali, even as revenue growth under the eight-year-old regime has slowed to its weakest level. The move appears designed to trigger a Laffer curve–type response: Though the principle is rooted in direct taxation, the extension to GST suggests that lower rates could stimulate consumption and curb evasion. The Laffer curve posits that both excessively high and excessively low tax rates are suboptimal for revenue generation.
GST collections expanded just 1.7
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