GST rate cap will give ‘sin goods’ a cheaper run, de­clares Jait­ley

Hindustan Times ST (Mumbai) - HT Navi Mumbai Live - - FRONT PAGE -

NEW DELHI: Fi­nance min­is­ter Arun Jait­ley said on Fri­day an 18% cap on the goods and ser­vices tax (GST) rate as sug­gested by the Congress would re­sult in a flawed sys­tem as it could lower du­ties on a host of “sin” prod­ucts and lux­ury items that should at­tract higher taxes.

Jait­ley’s com­ments came on a day a panel led by chief eco­nomic ad­viser Arvind Subra­ma­nian bat­ted for a stan­dard GST rate be­tween 17% and 18% and a rev­enue-neu­tral rate (at which there would be no rev­enue loss to states or the Cen­tre) of 15-15.5%. In a re­port to the fi­nance min­is­ter, the panel also sug­gested scrap­ping a 1% ad­di­tional levy or “en­try tax” on cross-border trans­port of goods, a rec­om­men­da­tion in keep­ing with the Op­po­si­tion de­mand.

“There are sin prod­ucts (such as al­co­hol, cig­a­rettes) that need to be taxed high. There are pol­lut­ing prod­ucts and lux­ury items that should at­tract higher taxes,” Jait­ley said at a ses­sion in the 13th Hin­dus­tan Times Lead­er­ship Sum­mit.

The panel re­port pro­posed a three-tier rate struc­ture —12% for es­sen­tial items, 40% for “de­merit goods” such as lux­ury cars, aer­ated bev­er­ages, pan masala and tobacco prod­ucts, and 17-18% for the rest.

The GST, billed as In­dia’s most am­bi­tious tax re­form, aims to stitch to­gether a com­mon na­tional mar­ket by dis­man­tling fis­cal bar­ri­ers among states. Once im­ple­mented, it will re­place lay­ers of lo­cal levies such as val­ued-added tax and octroi by a sin­gle na­tion-wide tax.

The 122nd con­sti­tu­tion amend­ment bill, passed in the Lok Sabha in May, is stuck for want of po­lit­i­cal con­sen­sus in the Ra­jya Sabha where the rul­ing BJP does not have a ma­jor­ity.

The Congress, which for years ad­vo­cated the need for a coun­try­wide in­di­rect tax sys­tem, has in­sisted the GST rate be capped at 18% in the leg­is­la­tion it­self.

Fi­nance min­is­ter Arun Jait­ley at a ses­sion. SANJEEV VERMA / HT

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