New Delhi: Prime Minister Narendra Modi on Sunday ruled out a single tax rate under the Goods and Services Tax (GST), saying Mercedes car and milk cannot be taxed at the same rate. The Congress party’s demand for a uniform 18% GST rate would lead to a spike in food and essential items’ taxation.
GST has led to over 70% jump in indirect taxpayer base within a year, demolished check-posts and merged 17 taxes and 23 cesses into one single tax.
ALSO READ: One year of GST: The hits and misses
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.
GST is an evolving system which is calibrated based on feedback from state governments, trades and other stakeholders, Modi said in an interview to the Swarajya magazine.
“It would have been very simple to have just one slab but it would have meant we could not have food items at zero tax rate. Can we have milk and Mercedes at the same rate? 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%, at 18%,” he said in the interview.
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.
“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.
The GST, he said, has seen Indian cooperative federalism at its best. “We consolidated the states and developed proactively a consensus, where earlier governments had failed.”
“The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have 0% 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. Large number of items of daily usage are either exempted or in 5% slab. Some 95% items fall in/below the 18% slab,” he said.
The GST, he said, has been designed to eliminate Inspector Raj with the help of information technology. From returns to refund, everything happens online, Modi said.