Life in Gurgaon

‘Race to the bottom’: Arun Jaitley’s takedown of Congress over GST barbs

Source : hindustantimes.com

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Days after the Goods and Services Tax Council agreed to lower rates for nearly two dozen items, Finance Minister Arun Jaitley on Monday delivered a stinging rebuttal to the Congress that has sharply criticised the government for its implementation of the new indirect tax system and what it has called are, the high tax rates.

In his comeback, Jaitley underscored that the tax rates under GST were much lower than the 31 per cent “Congress legacy of indirect tax”.

“Those who oppressed India with a 31% indirect tax and consistently belittled the GST must seriously introspect. Irresponsible politics and irresponsible economics is only a race to the bottom,” Jaitley wrote in a blog, ‘Eighteen Months of the GST’.

“We transiently put them in the 28% slab. As the revenues kept increasing, we started bringing down the rates. Most of the commodities have seen tax reduced,” he said.

Jaitley hinted that the country may eventually have a single standard rate of GST through merging of 12 and 18 per cent slabs, adding that the 28 per cent slab will soon be phased out, except in case of luxury and “sin goods”.

Over the weekend, the GST Council had cut tax rates on about two dozen items to reduce the number of items taxed at the highest slab of 28 per cent. Jaitley, who had overseen introduction of the new tax regime that Congress president Rahul Gandhi refers to as the Gabbar Singh Tax, said he believed that the tax rate would eventually come down.

“A future roadmap could well be to work towards a single standard rate instead of two standard rates of 12 per cent and 18 per cent. It could be a rate at some mid-point between the two. Obviously, this will take some reasonable time when the tax will rise significantly,” Jaitley said in a Facebook post.

The country should eventually have a GST which will have only slabs of zero, 5% and standard rate with luxury and sin goods as an exception, he said.

Regarding the highest tax slab of 28 per cent, the Minister said with the GST transformation completed, India was close to completing the first set of rate of rationalisation by phasing out the highest slab except in luxury and sin goods.

“The sun is setting on the 28 per cent slab… Today, barring tobacco products and some luxury goods, almost all items had been transferred from 28 per cent slab to 18 and 12 per cent.

“Only cement and auto parts are items of common use which remain in 28 per cent slab. Our next priority will be to transfer cement into a lower slab. All other building materials have already been transferred to 18 and 12 per cent… The 28 per cent slab is now a dying slab,” he said

The GST council did not lower tax rates on cement and automobile parts because of the huge revenue implications. The total GST collection from auto parts is typically about Rs 20,000 crore in a financial year. The contribution of cement is about Rs 13,000 crore.

“Our next priority will be to transfer cement into a lower slab,” he wrote.

Jaitley also said the political noise outside the GST Council was inconsistent with the harmony inside as at its 31 meetings, the body has “behaved with utmost responsibility” taking several thousand decisions unanimously and with consensus.

Referring to the government falling short of the collection targets, the Minister said the targets set in the GST regime were unprecedentedly high, with a 14 per cent increase over 2015-16 tax collections guaranteed.

“Thus, even when 18 months have not been finished since the launch of GST, on this day every state has a target of improving its revenue with three 14 per cent increases compounded annually over the base year of 2015-16. This is close to a 50 per cent being reached in the second year itself,” he said.

“It is almost an unachievable target. Yet six states have already achieved it, another seven are within a striking distance of achieving it and only 18 are still more than 10 per cent away from achieving it.”

Jaitley said that those states which do not achieve the target of 14 per cent are paid out of the compensation cess.