AIR-CONDITIONING doesn’t feel like much of a luxury in parts of India, but the taxman begs to differ. Cooled restaurants are deemed posher. Their patrons are liable to additional taxes the unventilated masses do not bear. Luckily for sweat-prone diners there is a catch: the tax only applies to the service and not the food, so only part of the tab incurs the extra levy. In their wisdom, India’s bureaucrats once decided that 60% of a restaurant’s offering is food, and so air-conditioning triggers a service tax payable on just 40% of the bill.

Indirect taxation in India often seems the product of a micromanaging bureaucracy run amok. The result of combined taxes levied by its 29 states, union territories and the central government is that the same products in different regions, or different products in the same region, are taxed at different rates. This makes it difficult to trade between states. Tariffs are enforced by internal borders at which lorries languish for hours. It also distorts the economy in favour of goods and services taxed at lower rates (usually as a result of energetic lobbying). The agreement in August to subsume all manner of national and regional levies into a single goods-and-services tax (GST), applicable nationwide, was hailed as a historic opportunity to rid the economy of both problems, potentially adding two percentage points of GDP growth a year.

Since then, as so often happens, politics seems to have got in the way of sound economics. Whereas it had once been assumed the GST would be levied at a single rate, with a few exemptions (eg, for food, health care, etc) and a “sin” rate (tobacco and alcohol), the end result is looking far more complicated. The central government, in negotiations with state authorities, has put forward a schedule of seven different GST slabs ranging from 4% for gold to 26% or more for middle-class goods, with other goods being taxed at 6%, 12% or 18%, and basic goods remaining exempt.

Economists are aghast: much of the gain from moving to a single tax-rate nationwide came from stamping out the inefficiency of multiple rates, which prod businesses towards providing goods and services favoured by the tax code rather than by consumers. Government officials have justified the newly added complexity by arguing that a sudden move to a single headline rate would have resulted in sudden price surges for goods that are currently taxed at a lower level.

In fact, the central and state governments involved are trying to reduce the costs and risks of moving to a new tax structure, even if it means some of the benefits are lost. The new system has to be agreed by a new “GST council” made up of the finance minister and his counterparts at state level. It is meeting over the course of October and November. The states are concerned they are giving up their right to levy their own consumption taxes and will be inadequately compensated. The central government has had to guarantee states they will be reimbursed if they lose out, at least for the first five years.

Because revenue data are so poor, nobody can precisely gauge the potential impact of moving to new tax rates, much less model it. But bureaucrats in Delhi are said to be fretting that a bold move to a new single-rate system might leave them on the hook at a time when the government has pledged to cut the budget deficit. To avoid losing out, they want the new GST rates to mirror existing taxes, complete with their favourable treatment for unventilated eateries. So biscuits will continue to fall in different bands depending on how luxurious the government judges them to be. Creamy ones, for example, will suffer particular punishment.

Things will be a touch simpler—the seven rates will replace several hundred tax levels nationwide, estimates Neelkanth Mishra of Credit Suisse, a bank. That levies will be the same across India will create a true single market for the first time in its history. And there are fervent hopes that, because businesses will have to register invoices in order to qualify for tax rebates, more will be pushed into the formal economy, so boosting both long-term economic growth and the tax kitty.

A lack of resolve on indirect taxation bodes ill for the next stage of fiscal reform. Praveen Chakravarty of the IDFC Institute, a think-tank, points out that India is far too reliant on indirect taxes, such as those on goods and services, rather than direct levies on income or wealth. Fewer than 50m pay direct taxes in a country of 1.3bn. Shifting the burden to direct taxes would be fairer but involve taking on entrenched interests far more powerful than non-air-conditioned restaurateurs.