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Can’t tax milk, Mercedes equally: PM Modi rebuts Congress’ one GST slab demand

Hindustan Times logo Hindustan Times 01-07-2018
Narendra Modi addresses a gathering © Getty Narendra Modi addresses a gathering

On the first anniversary of the Goods and Services Tax (GST) on Sunday, Prime Minister Narendra Modi ruled out a single tax rate under the tax regime saying Mercedes car and milk cannot be taxed at the same rate but conceded that the GST is an evolving system.

In an interview to ‘Swarajya’ magazine he said that accepting the Congress party's demand for a uniform 18% rate would lead to a spike in food and essential items’ taxation. “It would have been very simple to have just one slab but it would have meant we could not have food items at zero percent tax rate.

Can we have milk and Mercedes at the same rate? “So, when our friends in 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 zero or 5%, at 18%,” he told the magazine.

Modi who once opposed the GST as the Gujarat chief minister before turning into an ardent advocate of the new tax regime after becoming the Prime Minister in 2014, totted out statistics in support of it. He said the GST has led to over 70% jump in indirect taxpayer base, demolished check-posts and merged 17 taxes and 23 cesses into one single tax within one year of its launch.

GST, which subsumed central levies like excise duty and service tax and state taxes like VAT, is aimed at making indirect taxation “simple” while eliminating inspector raj, he said. The new tax is an evolving system which is calibrated based on feedback from state governments, trades and other stakeholders.

Also watch: 18% more direct taxes collected after GST, says Jaitley

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(Video by NDTV)

Modi said against a total of 66 lakh indirect taxpayers registered since independence, 48 lakh new enterprises have registered since the launch of the GST on July 1, 2017. “Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers, if GST were indeed very complex?” he asked.

“Check-posts across the country have been abolished and there are 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?” Modi brushed aside criticism of the GST’s implementation, saying the new tax regime 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,” he said.

The GST, he said, has seen Indian cooperative federalism at its best. “We consolidated the states and developed proactively a consensus, where earlier governments had failed.” The Prime Minister said earlier many taxes were hidden and under the GST, “what you see is what you pay.” “The government has reduced taxes on nearly 400 groups of items.

Around 150 groups of items have zero percent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. Large number of items of daily usage are either exempted or in 5% slab. Some 95% items fall in/below the 18% slab,” he said.

The Prime Minister’s comments are in sharp contrast with those of West Bengal’s finance minister Dr Amit Mitra who headed key committees on the tax regime. On the eve of the first anniversary of the GST, Dr Mitra told NDTV that the new tax had not performed up to expectations because the Centre did not carry out a pilot project to test the water and that it played only optics last July to push through the tax regime.

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