ON A day it supported the bill on GST in Rajya Sabha, the Congress made it clear it will insist the subsequent bills mention the standard tax rate at 18 per cent. There can be no tax law without a tax rate, said former finance minister P Chidambaram.
“It is like enacting Hamlet without the Prince of Denmark,” said Chidambaram, also warning the government against introducing such bills as money bills.
“We have got no assurance so far… We have made the point and the point is being appreciated that tax law is incomplete without a tax rate. I think the legal advisers of the government and the finance minister who himself is a legal luminary recognises that a tax law must have a tax rate… We have impressed upon the Union government that the law which will come in the winter session must have a tax rate, otherwise the law is suspect, it is vulnerable to be struck down. I think we have made our point and it is for them to respond,” Chidambaram said.
He said the Congress has deferred its demand for now because of the views expressed by the state finance ministers and because it recognises that it is difficult at this stage for the government to mention a rate in the bill. “… Since the state finance ministers are unwilling to put the cap in the constitution amendment bill, we have persuaded the government that they must indicate the standard rate in the CGST and IGST bills,” Chidambaram said.
“Parliament does not have full control over a constitution amendment bill because it has to be ratified by 50 per cent of the states. But Parliament has full control over the CGST and IGST bills. Therefore we expect that the standard rate will be specified in the CGST and IGST bills,” he added.
He said the Congress’s view is that the revenue neutral rate should be approximately 15 to 15.5 per cent and the standard rate should be 18 per cent. “There are powerful economic arguments why standard rate should be 18 per cent… There is broad consensus among the Opposition parties that the standard rate of 18 per cent recommended by the chief economic adviser’s report is an appropriate rate,” he said.
Asked why the Congress has backtracked from its earlier demand, he said, “We have not backtracked. We have persuaded the government to change its position on the one per cent [inter-state tax]. We have persuaded the government to alter its formulation on the dispute resolution mechanism. If the dispute resolution mechanism is not established according to settled legal principles, the courts will strike it down… When new facts emerge, new arguments are made. We change our position, we modify our position, we improve our position. The new facts are the chief economic adviser’s report.”
Asked what the Congress will do if the state finance ministers recommend that the standard rate should be around 22 per cent, he said it was a hypothetical question. “We don’t know what rate. We are cautioning everybody that a high standard rate would be inflationary… I am sure state finance ministers would recognise the inflationary impact of such a move.”