The cardinal principle of indirect taxation is that it should have ideally just one rate or at the most two, regardless of the nature of the goods and services to be taxed. This is because the moment there are multiple rates, the scope for lobbying and litigation to decide which goods and services fall in which category increases and tax administration becomes complicated and costly. Any benefits that are to be provided to any sections of the citizenry for various reasons should not be through differential indirect taxes and exemptions but through subsidies to the parties concerned. Any restrictions that have to be imposed on the sale of particular goods and services which are harmful, like cigarettes and pan masala, can be done by imposing higher income taxes on the profits of firms producing them rather than by higher separate indirect taxes on their sale which will have the same effect of pushing up the prices of these goods to discourage people from buying them. In this way the lobbying is deflected away from tax imposition towards the provision of subsidies as it should be and indirect tax related litigation, which now clogs the courts of this country, is avoided altogether and there is very little distortion of the market due to taxation. The huge bureaucracy that is presently involved in indirect tax administration with its attendant costs, thus becomes redundant and can be gainfully redeployed to ensure higher direct tax compliance. Moreover, since tax evasion and avoidance become near impossible in a single indirect tax regime it becomes extremely difficult to conceal incomes and so the direct tax base and volume too increases substantially.
5. Apart from this, exporters have expressed concern about getting timely refunds of the GST paid on their inputs without which their working capital requirements will increase making their products less competitive on the international markets.