Nation was “under-prepared” for this imperfect new indirect tax regime: Chidambaram

Pune: The Modi Government’s Goods and Services Tax (GST) is very, very imperfect and nation was under-prepared for this imperfect new indirect tax regime, senior Congress leader and former finance minister P Chidambaram said here today.

“It cannot be called one nation, one tax as it has seven or more rates. 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),” he said. ‘Some goods and services will also be totally exempted,” Mr Chidambaram said. “It is a mockery of the GST. When we have rates such as 0.25, 3, 5, 12, 18, 28 and 40, and possibly more because of the discretion vested with the State Governments, how can we call this a ‘one nation, one tax’ regime,” he wondered. “This is a very, very imperfect GST.

This is not the GST which UPA Government had envisaged,” he said. He noted that authorities and businesses were “unprepared or under-prepared” for the tax regime and said its launch should have been deferred by two months, while the GSTN (goods and services tax network) should have been put on a trial run. “I suggested a trial run for two months and effectively we should have a roll out of GST from September 1,” he said. The Congress will press for a reduction in tax rates and demand a cap of 18 per cent, besides seeking to bring petroleum, electricity and real estate under the new tax regime, the former finance minister told in interaction.

He said experts feared that in the short term it would be so, but his party would welcome any measure taken to contain inflation. On whether the country could have one tax on luxury goods as well as essential items, the former Finance Minister said, ‘It meant the Government did not believe in the GST.’ Mr Chidambaram said by definition, the GST was a single tax and if the Government thought the country was not yet ready for it, “do not have it and do not call it the GST”.

“For Indian conditions, there could be a standard tax and standard minus, standard plus. When you have seven or even 10 tax rates, don’t call it the GST. Call it your Indian indirect tax system, don’t call it the GST,” he said. Mr 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 added.

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?”