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NEW DELHI: Finance minister Arun Jaitley on Monday hinted at further rationalisation of goods and services tax (GST) rates, while slamming opponents who have been advocating a shift to a single-rate regime, in what was seen as a rebuff to Congress vice-president Rahul Gandhi.
“Rationalisation process in a transition (phase) will continue… Such rationalisation in future will depend on revenue buoyancy,” the finance minister said.
On Friday, the GST Council, led by Jaitley, slashed rates of over 200 items with the levy on 176 reduced from 28% to 18%, leaving just 50 in the highest slab. While state FMs have said this list will be pruned further, a change in lower slabs of 12% and 18% is also on the cards in the coming months.
Jaitley has repeatedly said over a period of time, these two rates will converge into one, something he reiterated on Monday but linked it to tax buoyancy.
Jaitley hopes GST rate cuts will reduce inflation
In what seemed to be a response to Rahul Gandhi’s claim that Congress will shift all products to a single bracket, Jaitley said: “Those who are speaking of a singlerate GST have no understanding of the tariff structure… they do not have elementary understanding of GST.”
With the rate cuts, the government is expecting the gains on a host of products — from cosmetics and razors to washing powder — to be passed on to consumers.
Jaitley said GST has brought down inflation. “This actually reduces inflation. This is one of the advantages of a more efficient tax system… Effectively, today, almost all items in the goods category are better off than they were prior to July 1,” he said.
The minister said that including central excise, state VAT and central sales tax, the levy on several items added up to 31%, which was reduced to 28% when GST was launched. Elaborating on it, he said the process of reduction in the top slab was under way since August. “This is a threefour month exercise… These are all consensus decisions of the GST Council and process started after GST implementation. It is juvenile politics to link it with either elections or political demands,” the minister said.
He said the GST Council had opted for a structure where food items were exempted, while aam aadmi products were kept in the lowest bracket of 5%. “Wheat, rice or sugar can’t be taxed at the same rate as a Mercedes (car) or a yacht or tobacco. So, rates will have to be different.” In recent tweets and public meetings in Gujarat, Gandhi has talked about Congress reducing rates to under 18%, something that has been repeated by some of his party colleagues.
Jaitley said revamped filing mechanism that has been put in place, will ease the burden on taxpayers and going forward he wants the system to settle and apprehensions to disappear.