More tax cuts in offing? FM Arun Jaitley hints at further ‘rationalisation’ of GST rates
Having undertaken the most comprehensive overhaul of the Goods and Services tax since its launch on July 1 by slashing rates on over 200 items on Friday, the government may look to further ease the GST burden on the common through more rate cuts.
Finance Minister Arun Jaitley on Monday hinted at this possibility, saying there was scope for further rationalisation of GST rates.
“There is obviously scope for rationalisation of rates. In four months, we have rationalised the 28 per cent slab,” he said on Monday.
“Such rationalisation in future, depending on revenue buoyancy, will take place... Procedural rationalisation will happen,” the minister said.
“So, wherever there is scope, improvement and procedural simplification will always continue,” said the FM, who also heads the all-powerful GST Council.
Jaitley also dismissed the opposition’s assertion that it was the pressure it had mounted on the government that had forced its hand into cutting rates just ahead of the Gujarat elections.
Jaitley said linking the reduction in rates to elections in the state was “juvenile politics”.
“This rationalisation is a three-four month exercise, which the Council and the fitment committee have recommended. These are all consensus decisions of the council,” Jaitley said, rejecting attempts to link the rate cuts with politics.
Reports have said that it was the surplus in revenue that the government earned that eventually led to the decision to bring 211 items, including 180 in the top 28 per cent bracket under lower tax slabs.
A TOI report had earlier pointed out that states were expecting a revenue shortfall of Rs 17,000 crore in July. However, the deficit had fallen to Rs 7,000 crore in August which gave states the confidence to ahead with the tax cuts. Factoring in of collections of nearly Rs 8,000 crore from the compensation cess levied on automobiles, aerated drinks and tobacco also led to a consensus among states, the report added.
The Finance Minister’s “juvenile politics” jab comes in wake of Caongress vice president Rahul Gandhi’s attacks on the Centre over GST and former FM P Chidambaram’s tongue-in-cheek jibe at the government following the GST rate cut.
While Rahul had hit out seeking a single GST rate of 18 per cent, Chidambaram sought to link the rate cut with Gujarat polls.
“Thank you Gujarat. Your elections did what Parliament and common sense could not do,” Chidambaram said on Twitter.
Jaitley said those who spoke of a single GST rate have no understanding of the tariff structure.
“Food items have to be taxed at nil. Aam aadmi items have to be taxed at the lowest range of 5 per cent.
“Luxury goods, sin products and products hazardous to environment and health can’t be taxed at the same rate as aam aadmi products,” he said.
“So wheat, rice, sugar can’t be taxed at the same rate as a Mercedes car or yacht or tobacco. So those who speak of a single rate today have no elementary understanding of GST.”