Modi govt's 7-rate tax structure a 'mockery of GST', says P Chidambaram

Senior Congress leader said the BJP should have worked to forge a consensus on three rates

The goods and services tax (GST) regime rolled out by the Narendra Modi government on July 1, with its “seven or more rates”, is a “mockery” of the GST that was originally planned, senior Congress leader P Chidambaram said on Thursday.

The former finance minister said the Congress was “convinced that the administration and businesses — especially small and medium businesses — were unprepared or underprepared for the GST roll-out”. 

Chidambaram said businesses wanted some more time and the roll-out should have been deferred by two months. Also, the GST Network (GSTN) should have been put through a trial run, and the glitches, if any, should have been fixed, he added. He said the GST rate should have been capped at 18 per cent.

Traders and small and medium enterprises (SMEs) have held protests across the country in the past few days. In Tamil Nadu, textile units on Thursday began a six-day strike, demanding abolition of the GST on textile goods. 

The Confederation of All India Traders (CAIT), an umbrella body of traders, said the GST regime was entirely based on e-compliance but “60 per cent of small businesses in the country, particularly in Tier-II and Tier-III cities, still have not computerised their business formats”. 

Addressing a press conference at the Congress headquarters here, Chidambaram said, “This is a very, very imperfect law. This is not the GST which we (the UPA) had envisaged...What has been implemented, however, is a GST with seven, or possibly more, rates. It is a mockery of GST.”

“When we have rates like 0.25, 3, 5, 12, 18, 28 and 40, and possibly more because of the discretion vested with state governments, how can we call this a 'one nation, one tax' regime?" he said.

Chidambaram said the Congress would press for a reduction in rates and a tax cap of 18 per cent. The party, he said, would also articulate fears and grievances of small and medium businesses, multi-state businesses and consumers. He said the Congress would demand that petroleum products, electricity and real estate be brought under the GST.

“We will hold meetings and conferences to emphasise that the Congress was the original proponent of the GST, and we will campaign for a true GST that was designed and advised by tax experts such as Vijay Kelkar and Parthasarathi Shome,” he said.

The former finance minister said the GST was envisaged as a single rate of tax on all goods and services to replace practically all indirect taxes. “A single GST rate means a ‘standard’ rate as well as a ‘standard plus’ rate (on demerit goods) and a ‘standard minus’ rate (on merit goods),” he said, adding that some goods and services would also be totally exempt.

Chidambaram said this was the GST that the UPA had envisaged. “Yashwant Sinha (former finance minister and senior BJP leader) has also confirmed that this was the GST we should have designed and implemented,” Chidambaram said.