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In Focus

August, 4

18% or 20%, Corporates will pass it on to people. GST rate exceeding 18% will affect common man

The GST Bill was passed with amendments in the Rajya Sabha. For 2 years, Shri Narendra Modi led BJP Government tried to pass this Bill without the support of the principle Opposition, and failed. We are glad the Government eventually saw reason, and tried to pass this important legislation on the strength of arguments, rather than numbers. 

It was the Congress party which conceived, drafted and introduced GST and is its ardent supporter in the interest of a ‘uniform tax regime’ and enhancement of India’s growth story. But, the Congress didn’t want the passage of a flawed bill, as introduced by the Modi Government, and we raised many concerns and suggested amendments which would improve the bill.
The Government conceded to our demand that the additional 1% manufacturing tax would have gone against the idea of a uniform GST. The Government even conceded to our second point that there must be a third party dispute resolution mechanism, which the Bill promises. 

Finally, the main point of difference was the tax rate. Globally, in high income countries, highest GST or indirect tax rate is average of 16.8%. In emerging countries like India, it is an average of 14.1%. Even a report by the Chief Economic Advisor of the BJP Govt says that the standard rate should not cross 18%. Anything higher than this would be inflationary, and encourage tax evasion. Cap of 18% is in the sole interest of not overburdening the people of India.

Our reason for the cap to be incorporated in the Bill is so that it cannot be increased without a simple majority in Parliament. Government cannot then increase the GST rate at its own whims and fancies.

Speaking on this issue in the Rajya Sabha, Congress leader P Chidambaram said, “The people of India expect low Indirect Taxes. There are a lot of corporate who speak in favour of passing the GST Bill. It does not matter to them whether the rate is 18 or 20; they will pass it on to the consumer. There are many voices in the country to speak up for the corporate supporters. But, somebody must speak up for the people. That is precisely what our party is doing. In the name of the people, I ask you to keep this rate at the rate recommended by your CEA, namely 18%. 

The BJP has gone up and down the country trying to slander the Congress party by saying that we don’t want the GST. The truth is that we don’t want a flawed GST bill which would hurt the final consumer. This is a transformative legislation, and the Congress wanted to ensure that a good bill was passed by the Parliament. 

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