Possible to merge 12%, 18% GST as incomes increase: Arun Jaitley
NEW DELHI: The tax on goods and services ( GST ), which was completed two years on Monday, is likely to experience further rationalization with the fusion of 12% and 18% of slabs, former finance minister Arun Jaitley has said.
As revenue increases further, it will give an opportunity to policymakers to possibly merge the 12% and 18% slab into one rate, thus, effectively making the GST into two-rate tax, Jaitley said in a blog post.
The former finance minister , one of the architects of the most ambitious tax reforms in the country, said GST had proved to be beneficial for both consumers and tax payers. “After two years, one can confidently argue, without fear of contradiction that GST proved to be both consumer and assessee friendly. The high taxation of pre GST era pinched the consumers’ pocket and acted as a disincentive against tax compliance,” said Jaitley, who is recovering from an illness and has opted out of the council of ministers. “The last two years have seen each of the meetings of the GST Council reducing the tax burden on consumers as the tax collections improved. An efficient tax system certainly leads to better compliance. The 31% tax, which was temporarily 28%, has seen the largest single reform. Most items of consumer use have been brought in the 18%, 12% and even 5% category.”
This exercise had to be done gradually as the income increased. Movie tickets, previously taxed from 35% to 110%, were reduced to 12% and 18%. Most articles of daily use are found in the slab zero or 5%. The loss to revenue because of this overall reduction has been more than Rs. 90 billion annually, Jaitley said.
He said India had witnessed one of the smoothest transition to the GST in most countries governments had the elections because of rolling out GST. Within the first few weeks of the implementation, the new system settled down. There were a few protests in Surat. The issues were resolved. The BJP won all the assembly seats in the Gujarat poll in Surat. In 2019, the BJP won the Surat seat by the highest margin in the country.
Jaitley said those who argued for a single slab GST must realize that a single slab is possible only in extremely affluent countries where there are no poor people.
It would be unfair to apply a single rate in countries where there are a large number of people below the poverty line. the direct tax is a progressive tax . The more you earn, the more you pay. A in direct tax is a regressive tax . In the pre-GST regime, the rich and the poor, on various commodities, paid the same tax. The multiple slab system not only checked inflation, it is also ensured that the aam aadmi products are not exorbitantly taxed. Illustratively, a hawai chappal and a mercedes car can not be taxed at the same rate.