We want capping of GST rate in law

By | September 5, 2016
September 5, 2016
More than half the states have already passed the Constitution amendment Bill on GST. Do you think the GST could now be rolled out on April 1, 2017, as targeted by the government? Since the Bill has been passed and ratified by the required number of states, it is for the government to take it forward. It needs to ensure there is strong and broad consensus on the nature of CGST (central GST) and IGST (integrated GST) Bills. The central government also needs to work with the states on an acceptable GST rate. The rate has to be capped since it is going to subsume all present duties and taxes of the Centre and states. The government should keep it at a globally acceptable threshold. Which is what? Anything below 20 per cent. Above 20 per cent would be meaningless. And, don’t forget that they (government) have not been able to persuade some states to allow taxing of petroleum goods. These are there in the Bill but zero rated. Alcohol has been completely kept out; electricity is out. If you calculate, it would be close to 22-25 per cent of the tax base. So, you are working on a small revenue base and you have to bring down duties. Now, how do you lower it without having widened the tax base. That is where a consensus between the Centre and states and the GST council is a must. Wasn’t your earlier demand to cap the GST rate at 18 per cent? We did not snatch this number from thin air. It was the government which said 18 per cent, and we said cap it. They also said they have not taken certain things into consideration including cess imposed subsequently. Fine. But, now they have to find an acceptable rate between the Centre and states. But states are not comfortable with lower rate. They want, for instance, a rate above 20 per cent. Then how will you create a common market? In any case, indirect taxation is regressive. Direct taxes have a larger share in the tax kitty of most of the developed economies. Our efforts should be to bring down the indirect taxation and improve the revenue collections through direct taxation. Do you see any rift between your party and the government if the latter decides to bring the CGST and IGST Bills as money Bills? That would be unfair on the part of the government and an act in bad faith because this is the important constitutional change. Let us not forget states are principal stakeholders. How can you keep them — the Council of States or the Rajya Sabha — out of any discussion? The Rajya Sabha is the first house under the Constitution. Let us not forget that we are a union of states, but also a federal polity. This must not be forgotten. Secondly, there are so many things which are going to be addressed in the Bill. It will have many things which would justify the Bill to be the financial Bill. If you are saying there is appropriation of money from the Consolidated Fund of India, where is the appropriation? It is rather money collected from the people, money is then deposited in either state Consolidated Fund or in the Central one. It is revenue which is collected, shared and redistributed. Currently direct tax rates are mentioned in the finance Bill, but indirect tax rates could be altered outside the Bill as well. Why do you want the rate of GST, which is an indirect tax, to be mentioned in the finance Bill? It has to be ring-fenced in the law. The current mechanism is a separate issue. You don’t have GST. Don’t forget that GST will subsume service tax, central excise duty, additional customs duty, state sales tax, VAT, octroi and other duties. It’s not that simple. It has to be legally ring-fenced. It has to be in law. It can’t be left to the executive arbitrariness. What do you mean by ring-fencing the GST rate? Does it mean capping it? Yes, in the law. Your party had certain reservations about dispute resolution mechanism mentioned in the Constitution amendment Bill. Do you still have those reservations? We agreed to the formulation, which was put in the Bill. But, you wanted an independent mechanism for dispute resolution…. It was earlier the position. It was a negotiating position. The government had earlier not put it in the Constitution amendment Bill. Now, it has been put in the Bill. Now, there is no issue. There are reports that the government is considering advancing the winter session of Parliament and coming out with an early Budget. How do you look at these reports? I don’t know if they want to present six Budgets in their time. They have already presented three Budgets. This will be the fourth. Year 2018 will be the fifth and then another. Do they want to give six Budgets for a five-year term? The last one is always vote on account. Let us hear from the government what they want. With more than half the states ratifying the Constitution amendment Bill on goods and services tax (GST), ANAND SHARMA , deputy leader of the Opposition in the Rajya Sabha, tells Dilasha Seth and Indivjal Dhasmana that meeting the April 1, 2017, target for GST roll-out would depend on the government’s efforts to build a consensus. Edited excerpts: – www.business-standard.com[05-09-2016]

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