New Delhi, November 14, 2017

Says rationalisation of rates in the future depends on revenues

Finance Minister Arun Jaitley on Monday ruled out a single rate for the goods and services tax (GST), adding any further rationalisation of tariffs would be contingent on revenues.

“Those who are speaking of a single rate for the GST have no understanding of the tariff structure. Food items have to be taxed at nil. ‘Common-man items’ have to be taxed at the lowest rate of 5 per cent,” he said.

Congress Vice-President Rahul Gandhi had demanded a single GST rate of up to 18 per cent against the current slabs of 0, 5, 12, 18, and 28 per cent.

“Luxury goods, sin products, and products hazardous to the environment and health can’t be taxed at the same rate as ‘common-man products’. Wheat, rice, sugar can’t be taxed at the rate as a Mercedes car or a yacht or tobacco,” Jaitley said.

He, however, held out some hope for rationalising rates. “In four months, we have rationalised the 28 per cent slab.

Such rationalisation (in future) depends on revenue buoyancy,” Jaitley said.

Last Friday, the GST Council lowered the rates for almost 210 items; 176 items were moved from 28 per cent to 18 per cent.

The finance minister went on to enumerate the benefits of the GST. He said with a single rate per product across the country, all inter-state barriers had been removed and inspectors had disappeared.

Jaitley said the government expected the benefit of the lower rates to be passed on to customers, checking inflation.

The consumer price index-based inflation rose to 3.58 per cent in October from 3.28 per cent in September. The rise was largely because of food items but fuel and light — both largely out of the GST net — also contributed.

“This is an advantage of an efficient tax system. Rationalisation in the transition will always continue. Wherever there is a scope for improvement and procedural simplification, it will always continue,” Jaitley said.

Explaining the rationale for the rationalisation in rates done after the roll-out of the GST in July, Jaitley said its main objective was making the transition to the new indirect tax regime smooth.

PTI said Jaitley debunked the Congress’ claim that it had forced the government to lower tax on over 200 goods, saying rationalisation of rates was in the works for three-four months and it was “juvenile politics” to link it to any election or political demand.

He added the GST Council decided on the rate cut after the recommendation of the fitment committee. “It is a consensus decision,” he added.

Congress has made high tax rates and increased compliance burden in the GST regime an election issue in the run-up to the Assembly elections in Gujarat. It has claimed credit for the rationalising of the rates.

[The Business Standard]