Chidambaram: Need to cap GST at 18%

Aparna Parekh
Congress leader P Chidambaram speaking on the GST debate in the Rajya Sabha on August3, 2016.

Congress leader P Chidambaram speaking on the GST debate in the Rajya Sabha on August3, 2016.

Addressing the Rajya Sabha on the GST (Goods and Services Tax) debate, Congress leader P Chidambaram urged the Finance Minister to reflect again and cap the rate of taxation at 18 per cent.

“In the name of the people I ask you to keep this rate at the rate recommended by your CEA (Chief Economic Advisor) , namely the standard rate should not exceed 18…I know you are not incorporating it in the Constitutional Amendment Bill….”said the Congress leader while explaining that when the Congress demands capping the rate, it basically means that that the rate cannot be changed at the whim of the executive.

“A rate must only be changed by the approval of Parliament,” claimed Chidambaram during a debate on the GST Amendment Bill.

Chidambaram also warned that even though the government can avoid mentioning a tax rate today during a debate on the amendment bill, the government will not be able to do when the bills to implement the GST will come before the Parliament.

The Congress veteran then went on to warn that the party will “campaign throughout the country appealing to the people of India to support the idea that the standard rate of GST should not exceed 18 per cent.”

“However if the government doesn’t care about inflation, doesn’t care about the acceptability to the people of India, doesn’t care about efficiency, go ahead and charge 24 or 26 per cent…but that is defeating the purpose of GST,” he challenged.

So far the government’s argument has been that capping the rate of GST at 18 % will lower the revenues of the state, a charge the Congress has always denied.

“I don’t buy the argument that by fixing the standard rate at 18 per cent, the states will lose revenue,” argued Chidambaram.

He also said, “the Congress party did not pluck 18 from the air…18 came out from your report …the standard rate that will apply to most goods and most services must be 18,” insisted Chidambaram over and over again.

Apart from the rate of GST, which according to Chidambaram, was the core of the bill, he mentioned few other problems he had with the amendment bill.

Chidambaram said he had problems with the “clumsy drafting” of the bill, and the point about dispute resolution.

“ I still maintain that the provision (dispute resolution) introduced in Mr Mukherjee’s bill (in 2011) is the best provision, or is a better provision than the provision in the present bill…the draft circulated was abominally deficient,” said Chidambaram while urging the Finance Minister to further strengthen the bill in the matter.

He said, “Amend the provision to say that the GST Council shall by regulation establish a Dispute Resolution Mechanism and also include dispute arising otherwise than out of the recommendations of the GST Council.”

However, he also thanked Jaitley for doing away with the additional 1 per cent tax for inter-state transactions, a demand that the Congress refused to relent on. Chidambaram said that finally good sense prevailed on the government and it decided to do away with the retrograde provision.

Finally before ending his speech, Chidambaram assured the House that the Congress will not oppose the bill in its present form if the party was given a definitive assurance from the Finance Minister. The next two bills regarding the implementation of the GST must be brought to the Parliament as financial bills and not money bills, so that both Houses of Parliament can vote on it, said the former Congress minister before ending his speech.