P Chidambaram calls Current GST “Imperfect” and a “Mockery”


New Delhi, July 6 : Calling the GST law a “mockery” and inflationary with multiplicity of rates, the Congress party on Thursday demanded a cap of 18 per cent and inclusion of petroleum products, electricity and real estate in its ambit.

Former Finance Minister P. Chidambaram agreed with BJP leader Yashwant Sinha, one of his predecessors in the North Block, that there was a threat of the GST unravelling if there is indiscipline on the part of states like Tamil Nadu, which slapped a 30 per cent entertainment tax over and above the agreed levy.

Addressing a press conference at the party headquarters here, he said the nation was “underprepared” for the new indirect tax regime and added that the time of the roll-out should be been deferred by two months.

“The GST was envisaged as a single rate of tax on all goods and services that will replace practically all indirect taxes… A ‘single’ GST rate means a Standard rate as well as a Standard Plus rate (on demerit goods) and a Standard minus rate (on merit goods). Some goods and services will also be totally exempt,” Chidambaram said.

“This is the GST that the Congress party and the UPA government had visualised and which I had announced on 28-2-2006 as our goal. Mr Yashwant Sinha (Finance Minister in the Vajpayee government) has also confirmed that this was the GST we should have designed and implemented,” Chidambaram said.

He said what has been implemented, however, is a GST with seven, or possibly more, rates.

“It is a mockery of GST. When we have rates like 0.25, 3, 5, 12, 18, 28 and 40, and possibly more because of the discretion vested with states, how can we call this a ‘One Nation, One Tax’ regime,” he asked.

Chidambaam said “this is a very, very imperfect GST. This is not the GST we had envisaged and I had announced on February 28, 2006. Nor was it the one envisaged by Yashwant Sinha, who had chaired the Empowered Committee, nor Pranab Mukerjee, nor Manmohan Singh.”

“This is a very different animal,” he added.

The Congress leader said the Centre should have engaged the leaders of political parties to forge a consensus on three rates but failed to do so.

He said a Congress-led government would have certainly worked toward a single rate (with three variations). “Furthermore we would have capped GST at 18 per cent. That was eminently feasible,” he said adding the Chief Economic Adviser to this government had clearly recommended a GST rate of 15 per cent-15.5 per cent and demonstrated that it was a revenue neutral rate.

“If that report was correct, why did the government go in for rates like 28 per cent and 40 per cent,” he asked.

Chidambaram said the Congress was convinced that the administration businesses — especially small and medium businesses — were unprepared or underprepared for the roll-out of the GST.

The GSTN network should have been put through a trial run and the glitches removed. “The numerous requests for rationalisation of rates should be addressed. Businesses should be given time to familiarise themselves with the task of filing three returns every month. The special problems of multi-state businesses should have been resolved,” he said.

“The Congress party will watch the roll-out of GST closely. We will continue to articulate the fears and grievances of small and medium businesses, multi-state businesses and consumers. We will keep vigil over the possible misuse of the draconian powers given to the Anti-Profiteering Authority,” he said.

The former minister said the Congress party would highlight the elements of a true GST by holding meetings and conferences to emphasise that the Congress was the original proponent of the reform. “We will campaign for a true GST that was designed and advised by tax experts such as Dr Vijay Kelkar and Dr Parthasarathi Shome,” he said.

Replying to questions, Chidambarm said since 80 per cent of the goods and services will come under it, the GST will be inflationary. “We would certainly welcome any measure the government takes but it will be certainly inflationary in the short run,” he said.

Chidambaram rejected Finance Minister Arun Jaitley’s reported statement that the prices have come down since 80 per cent of the goods and services have come under the GST. “I don’t know from where he got these figures.”

To a question on claims from government representatives that the GST would add two per cent to the country’s GDP, Chidambaram said the tax is one of the factors but the GDP is not dependent on one factor but several — like oil prices, exports and imports. “That would be a very naive assumption,” he said, adding there is no correlation between the GST and GDP.

“To suggest that GDP will go up by 2 per cent would be like saying demonetisation would solve all problems. Still the black money is there, fake notes are in circulation and corruption is existent,” he said, adding demonetisation is “God’s gift to India”.

Asked about statements from the government that the GST would eliminate corruption, Chidambaram noted sarcastically, “I think demonetisation has ended corruption. There is no corruption at all. What will it put an end to?”

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