NITI Aayog says nothing wrong with many rates, cess under GST

Brushing aside criticism, NITI Aayog vice-chairman Arvind Panagariya on Monday supported the proposed fourslab Goods and Services Tax (GST) structure, saying it will help in dealing with any possible surge in inflation or revenue loss. Panagariya also favoured continuation of cess, dismissing criticism that it would dilute the original idea of a single rate.

Explaining the rationale behind the proposed four rates under GST, he said: “...big gains from GST will be because of having a single rate across any given product geographically.”

The GST Council is discussing a proposal to have four-slab tax structure for GST with 6, 12, 18 and 26% along with an additional cess for luxury and demerit goods. There is a divide on whether GST, which is to be rolled out from April 1 next year, should be a single rate regime or should it have multiple rates.

Earlier in the day, former finance minister P Chidambaram said the proposed multiple rate GST structure will be “disastrous” and nothing more than same old VAT rates in a “new shape”. “We sincerely hope that we do not misinterpret the design of standard, standard minus and plus rates of GST. We can have 20 rates. It will be disastrous and that cannot be GST, it will be fooling the country,” Chidambaram told an interactive session with IIM Calcutta students on economic reforms.

Panagariya, on the other hand, expressed the view that under GST, there will be national single tax rate on each product and “that is where the big gains are”. He added: “A lot of people think that they have identified single tax rate across commodities. But the bigger part is single tax rate on every product across entire country. There is no tax theorem that two rates are better than four.”