PM Modi’s advisor uses iPhone example to simplify GST for younger generation

He explained that GST evenly distributes the tax burden across the entire supply chain, ensuring no single point faces excessive pressure from government taxation, thereby levelling the cost impact throughout the production and distribution process

Sanjeev Sanyal, the Economic Advisor to Prime Minister Narendra Modi, offered a straightforward explanation of the Goods and Services Tax (GST) tailored for younger audiences during a recent GST Conclave. Using the example of an iPhone, he illustrated how GST applies tax at every stage of the production process rather than only on the finished product.

“Lots of inputs go into an iPhone, and then you get the finished product. Instead of just taxing the iPhone at the end, what you do is, at every stage, when the inputs come in, you tax them,” Sanyal said, addressing Gen Z and Gen Alpha viewers. This approach, he explained, avoids “cascading,” a situation where taxing only the final product leads to multiple layers of tax piling up, which overburdens the system.

GST’s role in fair taxation and recent reforms

Sanyal emphasized that GST is designed to spread the tax burden evenly across the entire supply chain. “GST is essentially a way of leveling out that entire supply chain with the pressure of the tax, so that nobody in the system is excessively pressured by the cost of the government taking money from the system,” he said.

The conclave followed the announcement of recent GST reforms set to take effect from September 22, which reduce the tax slabs to just two rates: 5% and 18%. However, a higher 40% “sin tax” rate will remain on luxury goods, pan masala, cigarettes, and sugary or carbonated beverages.

Sanyal acknowledged that the rationalization of GST rates could have been implemented sooner but was delayed due to the pandemic’s aftermath. “We began looking at GST rate rationalization seriously a year ago. When you reduce rates and rationalize them, there will be a one-time reduction in tax collection,” he noted.

The conclave also featured notable speakers such as Union Finance Minister Nirmala Sitharaman, Union Minister of Commerce and Industry Piyush Goyal, and Chief Economic Advisor V Anantha Nageswaran, who shared insights on the evolving GST framework and its impact on the economy.