INTRODUCING FLUID TAXATION

Researchers: TBR Balasubramanian

Keshav N
Title: Redefining the indirect tax structure in
India
Project focus: Sustainable Development
Institute: The TVS School, Madurai – 03

One way of looking at economic sustainability:

one of the four pillars of sustainable development, is
improving the living standards of people. India is in
the same race as well.
The disparity between the rich and poor affects a
developing economy. Imbalanced taxation further
widens this gap.
For all the order preserved in the direct tax
system, our country’s indirect tax policy is
disputable in its structure.
Goods and Service tax came into effect
replacing all other indirect taxes in the Indian
market. While a direct tax, say, income tax, is levied
on an individual after estimating their worth, GST
doesn’t work the same way.
For a train ticket, a truck driver pays the same
12% GST a well-off corporate executive pays. The tax
fare, though is considered peanuts by the executive,
makes up for a significant chunk of the trucker’s
paycheck. This paints a picture of our nation’s
economic distress.
GST has been identifying itself as a pro-poor
stratagem, exempting taxes from day-to-day
essentials. Essentials might be enough to keep the
impoverished class alive: healthy or not. However, it
surely isn’t sufficient to put them out of poverty.
How do we bridge this prejudice?
Case-in-point: “Fluid-Taxation”. The concept of
fluid-taxation tailors the indirect tax rates relative to
the financial strata of the consumer.
While our existing policies seem completely
progressive on a cursory glance, it takes a deeper
thought to realize their intricacies. Despite the small
enterprises seem to benefit from low GST rates, end
of the day, it’s only the consumer’s wallet getting
ripped off.
Through fluid-taxation, we bring the consumers
into the equation. GST is adjusted RELATIVE to the
consumer’s income. People are segregated into
different income groups to distinguish the tax
amount paid by each of them for a single instance.
Therefore, the truck driver is cut some slack in his
tax obligations.
A significant reduction in expenditure for a train
ticket need not necessarily turn the tide. But if this
‘reduction’ influences the lives of 36.4cr poor
households in every single commodity purchased, it
makes all the difference in the world.
The fluid-taxation strategy could face backlashes
amid political circles since it also accounts for a
substantial loss of revenue gained through fixed GST
rates. To bridge this gap, let us embark on a
retrospect.
In 2019, the GDP growth rate took a serious hit
by falling to 4.5%. To repair the collapsing economy,
the government announced a massive corporate tax
rate cut. They attempted to lure in new investors
with the reworked tax regulations.
It has now been three whole years. The
government couldn’t reap any tangible benefits as if
anyone has ever benefitted from this rate cut, it is
only the top 1% of our country. Moreover, the
government also had to face a loss of Rs.1.45 lakh
crore. Nonetheless, these bigshots are already
making a fortune which makes no notable difference.
 By implementing the “Fluid-Taxation” policy and
coherently notching up the corporate tax for the
wealthiest, India will inch towards sustainable
development faster than ever.
The Goods & Service Tax Act is a fantastic
improvisation from its predecessor. Yet, we ought to
go miles longer to survive the sea of poverty we’re
under. And this might just be the biggest step.
Without risk, comes no reward.