'India had smoothest shift to one of world's clumsiest indirect tax system', Jaitley extols 2 years of GST

News Bharati    01-Jul-2019
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New Delhi, July 1: Penning down a Facebook post on the second anniversary of GST rollout, former Finance Minister Arun Jaitley on Monday said that the 12 and 18 per cent tax slabs in goods and services tax (GST) could be merged going forward as revenue increased, thereby effectively making it a two-tier tax.
 
“As many as 20 states are already showing more than a 14 per cent increase in their revenues and do not require the centre to compensate them for revenue loss arising out of GST implementation”, he added.

 
 
Jaitley, who in May wrote to PM Narendra Modi expressing his unwillingness to be a Minister in the Modi 2.0 government due to health reasons, further said that most items of consumer use had been brought in the 18 per cent, 12 per cent and even 5 per cent category.
 
"Except on luxury and sin goods, the 28 per cent slab has almost been phased out. Zero and 5 per cent slabs will always remain. As revenue increases further, it will give an opportunity to policy makers to possibly merge the 12 per cent and 18 or cent slab into one rate, thus, effectively making the GST a two rate tax," he said.
Observing that a sudden reduction of tax rates on all categories of goods can lead to a massive loss of revenue for the government leaving it without resources to spend, Jaitley said, “This exercise had to be done in a gradual manner as the revenues increased".
Further stating that a single slab GST was possible only in extremely affluent countries where there were no poor people, he said, “It would be inequitable to apply a single rate in countries where there are a large number of people below the poverty line”
"In the pre-GST regime, the rich and the poor, on various commodities, paid the same tax. The multiple slab system not only checked inflation, it also ensured that the Aam Aadmi products are not exorbitantly taxed. Illustratively, a hawai chappal and a Mercedes car cannot be taxed at the same rate. This is not to suggest that the rationalisation of slabs is not needed. That process is already on," he signed off.
 
GST, which subsumed 17 local taxes, was rolled out on July 1, 2017. The GST currently has four slabs, being 5, 12, 18 and 28 per cent. On top of the 28 per cent slab, a cess is levied on automobiles, luxury, demerit and sin goods.