PC debunks govt stand on capping GST rate

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Old 21-Dec-2015
Post PC debunks govt stand on capping GST rate

Debunking the stand that GST rate cannot be put on the statute, former Finance Minister P Chidambaram today said there is a precedent of a tax rate being put in the Constitution, besides the powers government has to impose new levies in extraordinary situations.
Dismissing Finance Minister Arun Jaitley’s charge that the Congress was stalling passage of the Goods and Services Tax (GST) Bill for “collateral reasons”, he said the party was ready to cooperate with the government but has not heard from it after the meeting between Prime Minister Narendra Modi and Sonia Gandhi last month.
“If the government had constructively engaged with the Congress on its three principal objections since the beginning, the Bill would have been passed by now,” he said.
Chidambaram said Chief Economic Advisor Arvind Subramanian’s report on GST endorses two of the three demands of the Congress—there should be no one per cent additional levy on inter-state goods movement and the GST rate should not be more than 18 per cent.
On Jaitley’s stance that the tax rate cannot be cast in stone by including in the Constitution, he said there is a precedent when Professional Tax rate of Rs2,500 was included in the Constitution. “It is not unprecedented. If the government does not provide a cap in the Constitution Amendment Bill then it must be provided in the GST Bill. No tax can be levied without specifying the rate,” he said.
In case of extraordinary situations like natural calamities, the government always has powers to bring a new levy. Also, the income tax as well as customs duties are not being subsumed in the GST and they can be raised to mop up funds for special circumstances, he said.
Explaining the reasons for the Congress demand, Chidambaram said the cap has to be in the Constitution Amendment Bill so that no government can increase the rate arbitrarily.
“Our experience is that governments, including the Congress government in the past, have tended to increase the rates in small dozes. The GST is a regressive indirect tax and there cannot be any justification for saying it should not be put in Constitution Bill.
“Bring another tax. You have the power under Entry 97 List-1. Increase income tax, increase customs duty or impose a calamity tax,” he said.

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