Updated: July 2, 2022 5:15:50 am
SAYING THAT the current GST regime has “serious birth defects”, the Congress, for the first time on Friday, said that it should be scrapped and replaced by a new law that provides for a “single low rate” as a “starting point” and then “work out the further steps”.
Senior Congress leader Jairam Ramesh called for a discussion in Parliament and asked the government to convene an all-party meeting. Some “tinkering” here and there will not work, a fundamental change is needed, he said.
Addressing a press conference with Ramesh, former finance minister P Chidambaram said the GST had “serious birth defects” and “in the last five years these defects have only become worse and all those touched by GST have been seriously injured.”
“The first thing that has to be done is to get rid of these six (tax) rates. You have to have a single low rate. That is GST. World over, that is GST… it has to be a single low rate. That is the starting point… If you make an error at the starting point, your entire path, your travel on the path will be wrong. So let’s scrap this GST. Let’s go back to the drawing board, start with a single low rate. And then let’s work out the further steps,” Chidambaram said.
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Interestingly, the Congress was largely silent on GST at its Udaipur conclave, even as there were demands that it should seek a review or even a repeal of the Act. Some senior leaders, including former Union ministers Anand Sharma, Manish Tewari and Mani Shankar Aiyar, besides AICC data analytics department head Praveen Chakravarty, had raised these views during deliberations of the Chidambaram-headed group on economic affairs. But Chidambaram had argued that repeal was too radical an idea, and needed to be discussed at a different party level as it was outside the mandate of the group.
On Friday, Chidambaram said: “There are any number of absurdities in this law… it is very difficult to correct the law, you have to replace the law”. For instance, he said, “there are serious problems with two authorities taxing.”
“Half the taxpayers come under the Centre’s jurisdiction and half come under the states’ jurisdiction. It is a vertical division, whereas logically, if you have to divide the administrative powers, it has to be a horizontal division. The small taxpayers, small businessmen, should not have to go after the central tax collector,” he said.
“The law is so defective that the government has been forced to issue hundreds of executive directions. In five years, the government has issued 869 notifications, 143 circulars and 38 orders. That is a change every second day. This is a GST that is flawed, defective and unstable,” he said.
The “so-called GST that is in force today was not the GST envisaged by the UPA government. The GST conceived by the UPA was one with a single, low rate across all goods and services with few exemptions,” he said. “The GST that we have today is a complex web of many rates, conditions, exceptions and exemptions that will leave even an informed taxpayer completely bewildered. Not all registered dealers are informed taxpayers; as a result, they are at the mercy of the tax-collector,” he said.
He said the flawed GST has led to largescale destruction of the MSMEs. The worst consequence, he said, has been the complete breakdown of trust between the Centre and the States. He argued that the GST Council is dysfunctional and state finance ministers, including those of the BJP-ruled states, are unhappy.
“There is no real consensus in the meetings of the GST Council. The skewed formula on voting rights of the Centre and the states has been used by the Centre to push through decisions that are bitterly opposed by the states including, privately, by BJP-ruled states. The holding back of the arrears of compensation cess and the excessive resort to cesses (rather than shareable taxes) has increased the chasm between the two sides,” he said.
He said the Congress, if voted to power in 2024, “will work toward the replacement of the current GST by GST 2.0 that will be a single, low rate.”
On GST dues, Chidambaram said: “We don’t know what the truth is. According to the Centre, it has ordered the clearance of all dues up to May 31, 2022. Only the June share has to be paid. According to the states, they think there are huge dues… unless either the Comptroller of General Accounts, or, even better the Comptroller and Auditor General, publishes a definitive report on how much was collected during each year and how much was shared…. was it undershared or overshared, we don’t know… sitting in the Opposition, there is no way of knowing. The states say there are arrears, and the Centre says we have cleared”.
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