What use is GST if we cannot buy?

There was great rejoicing when the Goods and Services Bill was passed in the Rajya Sabha, where the ruling BJP is in minority. GST is supposed to unify all indirect taxes into one figure, which will combine India into one common market, remove distortions between states and provide a huge boost to business by removing bottlenecks. India is a poor country, where 96.7% of people earn less than $10 per day, which amounts to about Rs 21,000 per month. At that income one would be liable to pay income tax at 10% on any amount above Rs 250,000 per year. Not surprising, Indians are very sensitive to prices, so a higher rate of GST could cut consumption by increasing prices. Now that GST is law a council, comprising of the central and state governments has been set up to decide the rate at which goods and services will be taxed in the country. And here is where things start to get murky. The latest council meeting could not decide on a rate because the states want a higher rate of tax than recommended by economists. Why? Because our politicians care too much for the poor, for whom they want lots of handouts. If that helps them win elections, that cannot be helped. Also politicians have to travel abroad first class, with family, to learn how to serve our people. Thus, Deputy Chief Minister of Delhi had to travel all the way to Finland, a small Scandinavian country with free education for every child, to learn how to teach slum children in Delhi. So the council has discussed multiple rates of taxes, low rates on essential goods and higher rates on, what they consider as, luxury. They even want a cess on certain goods. Until rates of taxes are finalised we will not know what we will have to pay for essential goods and services, such as healthcare and travel. Experts believe that a rate of 18-20% will be revenue neutral, which means that neither central nor state governments will lose out on revenue collection. Goods will become cheaper but services will become more expensive. Even at 18% healthcare costs will rise. The vast majority of people cannot avail of healthcare at current costs so if costs rise further we can expect more suffering. At higher rates prices will rise. The Reserve Bank conducts a survey every quarter to see what people think about the level of inflation and although retail inflation fell to 4.31% in September the vast majority of people think that annual inflation rate is in excess of 9%. Experts may think that people are stupid but if people expect prices to rise they will demand higher salaries. Salaries are expected to rise by an average of 10.3% this year, which will be passed on to customers in higher prices. A high GST rate will confirm what people expect and higher salaries will be demanded. This will reduce growth. Which will reduce tax collection. The golden goose needs to be protected.