P Chidambaram on GST: It's no tryst with destiny, there was no need for a midnight celebration

The roll out of Goods and Services Tax (GST), India’s biggest tax reform since independence, has begun in Asia’s third largest economy, giving hopes to 125 crore Indians that the country has taken another convincing step to move to higher growth orbit. The GST was originally promised to replace a host of other taxes by the central and states governments and create a single tax economy. It attempted to replace a series of origin based taxes with a destination based tax. But, in reality, there are multiple rates even now (about eight) and some state governments like Maharashtra and Tamil Nadu have begun to impose additional levies on certain industries above the agreed GST rate. This has cast doubts on the ultimate fate of India’s GST journey. Not surprisingly, it has also broken the political consensus between the Modi government and major opposition parties about the grand tax reform. The Congress party, a key member in the opposition side, has been attacking the Modi government for rushing with an imperfect GST and harming the small businesses in the process. The party refused to participate in the midnight launch of GST on Friday night, along with a few other opposition parties. Congress has termed the GST as a ‘half-baked idea’. [caption id=“attachment_3376684” align=“alignleft” width=“380”]  P Chidambaram. AFP[/caption] In a conversation with Firstpost, P Chidambaram, former Union Finance Minister, said the current GST structure is a mockery of the originally envisaged tax reform. Here is the edited excerpts of the short interview: What was the Congress party’s views on GST towards the end of roll out? A ‘single’ GST rate means a Standard rate as well as a Standard plus (on demerit goods) and a Standard minus (on merit goods). Some goods and services will also be totally exempt. This is the GST that we had visualised. Yashwant Sinhaa, a key union minister under Atal Bihari Vajpayee’s government, has also confirmed that this was the GST we should have designed and implemented. You have already discarded the GST in its current form as an imperfect one. The seven, or possibly more, rates are a mockery of the current GST regime. When we have rates like 0.25, 3, 5, 12, 18, 28 and 40 percent and possibly more because of the discretion vested with state governments, how can we call this  ‘One Nation, One Tax’ regime?  The central government should have engaged the leaders of the political parties to forge a consensus on three rates; it failed to do so. But, even the Congress government would have found it difficult to implement a single-rate GST. Do you agree? A Congress-led government would have certainly worked toward a single rate (with three variations). Further more, we would have capped GST at 18 percent. That was eminently feasible. The Chief Economic Adviser to this government had clearly recommended a GST of 15-15.5 percent and demonstrated that it was a revenue neutral rate. If that report is correct, why did the government go in for rates like 28 percent and 40 percent? The midnight roll out of GST on Friday in Parliament has been compared with the historic ’tryst with destiny’ moment. The Tryst with Destiny was a defining moment in the history of this ancient country. Nothing can be compared with that midnight hour. GST is a partial reform of indirect taxes. It will undergo many radical changes. It is simply a stop on a long journey. There was no need for a midnight celebration. How would you have done it as FM? The date could have been marked as a business-like session during the day on 1 July. That is why I described the midnight event not as another tryst with destiny but as a Tryst with Destination Tax! What will be the Congress party’s approach going ahead on GST? The Congress party will watch the roll out of GST closely. We will continue to articulate the fears and grievances of small and medium businesses, multi-state businesses and consumers. We will press for a reduction in rates. We will highlight the features of a true GST. We will demand a cap of 18 percent. There is an anti-profiteering authority in place. Any concerns? We will keep a vigil over the possible misuse of the draconian powers given to the Anti-profiteering Authority. We will hold meetings and conferences to emphasise that the Congress was the original proponent of GST, and we will support a true GST that was designed and advised by tax experts like Vijay Kelkar and Parthasarathi Shome.