RULING OUT a single tax rate under the Goods and Services Tax (GST), Prime Minister Narendra Modi has said milk and Mercedes cannot be taxed at the same rate. He also indicated that there may not be any further reduction in the tax rates as the government has reduced taxes on nearly 400 groups of items.
“It would have been very simple to have just one slab, but it would have meant we could not have food items at zero per cent tax rate. Can we have milk and Mercedes at the same rate?” Modi said in an interview to Swarajya magazine. “So, when our friends in Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5 per cent, at 18 per cent,” he said.
Swarajya posted a part-transcript of the 45-minute interview on its website on Sunday, when the government marked the first anniversary of implementation of the new tax regime.
Modi said the tax rates have become transparent under the current system. Asked about a possible drop in rates, he said: “Talking about rates, earlier many taxes were hidden. Now, what you see is what you pay. The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have zero per cent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. A large number of items of daily usage are either exempted or are in 5 per cent slab. Some 95 per cent items fall in/ below the 18 per cent slab.”
The Prime Minister said the GST has, within one year of its launch, led to an over 70 per cent jump in indirect taxpayer base, done away with check-posts and merged 17 taxes and 23 cesses into one single tax.
The new tax regime, which subsumed central levies like excise duty and service tax and state taxes like VAT, is aimed at making indirect taxation “simple” while eliminating the Inspector Raj, he said, adding that it is an evolving system which is calibrated based on feedback from state governments, trades and other stakeholders.
Listing the positive changes, Modi said that against a total of 66 lakh indirect taxpayers registered since independence, 48 lakh new enterprises have registered since the launch of the GST on July 1, 2017. “Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers if GST were indeed very complex?” he asked.
“Check-posts across the country have been abolished and there are no more queues at state borders. Not only are truck drivers saving precious time but the logistics sector is also getting a boost and thereby increasing the productivity of our country. Would this be happening if GST was complex?” he said.
“The GST has seen Indian cooperative federalism at its best. We consolidated the states and proactively developed a consensus, where earlier governments had failed,” he said.
Responding to a query on criticism of GST, he said the new tax regime was a massive change, requiring a complete reset of one of the world’s largest economic systems. “The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time,” he said.