The “License Raj” has been crumbling in accelerated fashion since, for shorthand sake, the year 1991 but its potency as a shorthand in arguments about the interfering quality of the Indian state remains.
Take India’s new and long awaited national goods and service tax which aims to simplify a tax code that had been wildly different depending on what state you happened to be in — those different taxes had lead to delays at borders, mountains of paperwork, persistent queries by the uninitiated about what exactly an octroi is, etc etc.
Now, the new GST isn’t perfect by any means. It has different tax bands in place for different goods, there are some incongruous bits, and it is basically quite complicated. We’ll put some more in the usual place on that. But the point of this post is that the GST also contains a chunk which has brought License Raj rhetoric out in force once again. With our emphasis:
171. (1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.
(2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.
(3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.
That’s clause 171 of the GST Bill and it refers to plans to set up some