Prime Minister Narendra Modi has ruled out a single slab for the goods and services tax (GST), stating that milk and the Mercedes could not have the same rate. The GST regime was rolled out on July 1 last year. The central government on Sunday marked its first anniversary with an event in New Delhi, while Modi took to social media to showcase its advantages.
In an interview, Modi responded to criticism of his government’s version of the GST. He ruled out a single tax slab, pointed at the gains of the past one year, and admitted to teething troubles having plagued the regime in its first year.
To the Congress party’s criticism that there should be a single tax rate, he said: “It would have been very simple to have just one slab but it would have meant we could not have food items at 0 % tax rate. Can we have milk and Mercedes at the same rate?”
“So, when our friends in the Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at 0 or 5 %, at 18 %,” Modi said.
To criticism that the GST was “hurriedly implemented”, the PM said the government had been responsive, with issues identified and redressed in real time. He did not rule out the possibility that tax rates could come down further on some items. He said the government had reduced taxes on nearly 400 groups of items, and around 150 groups have a 0 % tax rate.
Modi also responded to the Opposition’s charge that the GST was “anti-people” by sharing on Twitter and the NaMo app the advantages the tax reform had brought for the common people. With the assembly elections scheduled in three key North Indian states in the next five months, and the Lok Sabha elections due in less than nine months, the PM tweeted that “decreasing prices”, because of the GST, were “helping poor and middle class”.
He also reached out to small businesses, a key support base of the Bharatiya Janata Party (BJP), and said the tax reform had provided “increasing opportunities for small and medium entrepreneurs”. With the hashtag “GST for New India”, the PM tweeted that the GST had brought growth, simplicity, and transparency. He said it had boosted formalisation, enhanced productivity, and furthered “ease of doing business”.
The PM said the GST had been designed to “eliminate inspector raj with the help of information technology”, and suggested that the GST roll-out was consistent with his vision of “minimum governance”. The PM in his last radio broadcast had said the tax reform was an example of cooperative federalism with decisions in all 27 GST Council meetings having been reached by consensus.
Modi said the number of enterprises registered since Independence until June 30, 2017, was 6.6 million. He said in just one year after the introduction of the GST, the number of new enterprises registered was 4.8 million. He said around 3.5 billion invoices were processed, 110 million returns were filed, and 100 million e-way bills generated. “Would we be looking at such numbers, if GST were indeed very complex?” Modi asked.
The PM said check posts across the country had been abolished and there were no more queues at state borders. “Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country.
Would this be happening if GST was complex?” he asked.
“GST was a massive change, requiring a complete reset of one of the world’s largest economic systems. The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time,” the PM said.
Modi said it was a work in progress, an evolving system that his government was calibrating, based on feedback from state governments, people, media, and other stakeholders. “A lot of feedback from the people, traders, etc, has been incorporated,” he said.
While the Congress pointed out that United Progressive Alliance 2 could not implement the GST because of opposition from Modi and the BJP, the PM said: “We consolidated the states and developed proactively a consensus, where earlier governments had failed.”
“Talking about rates, earlier many taxes were hidden. Now, what you see is what you pay. The government has reduced taxes on nearly 400 groups of items… If you look at the rates, for most of the day-to-day commodities the rate has actually come down….,” comments Modi.
The Congress has termed the Modi government’s GST “flawed”. Congress leader P Chidambaram on Sunday said the multiple GST rates must be reduced immediately to five, and then to three in a short time frame, and finally to a single rate with exemption from tax for the truly merit goods and services. Chidambaram said the single rate must not exceed 18 %.
Source: Business Standard