Cap GST rate at 18%, insists Cong

Congress leader P. Chidambaram said on Wednesday that the Goods and Services Tax (GST) Bill should be passed after serious debate as it was far too important a measure to be passed on a partisan basis.

Cap GST rate at 18%, insists Cong

New Delhi: Congress on Wednesday made it clear to the government that firm assurances for keeping the GST rate capped at 18 percent and bringing subsequent legislations needed for its rollout as financial bills alone could ensure its support to the long-pending Constitution Amendment bill.

Former Finance Minister P Chidambaram virtually laid down these conditions hours before the bill is to come up for passage in the Upper House.


At the AICC briefing, Chidambaram who is also a senior party spokesman, evaded a direct reply to a query on whether bringing the subsequent legislations-- Central GST (CGST) and Integrated GST (IGST)-- as financial bills was a new condition put forth by the Congress before it backs the legislation.

"We also demanded an assurance that the CGST and IGST should not be moved as money bill. The CGST and IGST are bills which will apply on taxpayers, on common man. They must be debated and voted upon by both Houses of Parliament. We hope to get assurance from the Finance Minister. If these assurances are forthcoming, we will be able to support," Chidambaram said.

Noting that the report of the Chief Economic Advisor Arvind Subramanian was a "solid economic document," he said it has suggested that a revenue neutral rate should be between 15 and 15.5 percent and the standard rate should be 18 percent.


Replying to a volley of questions, he insisted that there has been a broad consensus among opposition parties that the standard rate of 18 percent would be an "appropriate rate", it would be non-inflationary, it would be "something that could be sold to the people of India and it would be something that would not lead to tax evasion."

"We think at the end of the debate, we will be able to support the bill. But before the debate ends, the Finance Minister answer some of the questions raised by the opposition parties including mine and will also give the assurances that we demanded", he said.

Making a strong pitch for tax rate to be mentioned in the GST law, he said if it not there, then "it is like enacting Hamlet without the Prince of Denmark".

"No tax law will be upheld by any court without a tax rate," he said, adding that because of the views expressed by state Finance Ministers and because "we recognise that at this stage it will be difficult for the government to mention a rate in the Constitution Amendment bill, we have deferred the demand."

At the same time, he said Congress has made it clear that the government needed to mention the rate in the subsequent legislations.

Congress had been at loggerheads with the government for the past over a year on the GST bill on three counts--a cap on the rate in the Constitution Amendment bill, removal of one percent additional tax to be levied by manufacturing states and a Supreme Court judge-headed panel to resolve disputes in the new taxation regime.

Dismissing suggestions that Congress has backtracked on its demands, Chidambaram said it was his party which persudaed the government to drop the proposed one percent additional levy and warned it that if an independent dispute mechanism is not established legally, the courts will strike it down. "Judicial power cannot be taken away from the judiciary," he said.

When asked about the demand by several states that the tax rate should be around 22 to 24 percent as against 18 percent sought by Congress, he said it is the "burden" of the Union Finance Minister to persuade the states that the standard rate should be as low as possible so that it is acceptable to the people.

On whether the Congress has got an assurance from the government that the rate would not go beyond 18 percent, he said, "We have got no assurance so far. We have made the point and the point is being appreciated that a tax law is incomplete without a tax rate."

Replying to a query about whether the deadline set by the NDA dispensation for GST rollout by April next year is feasible, he said it depends on the preparedness of the government to pass the the CGST and IGST bills in the winter session.

Replying to a question, Chidambaram said the government could accept the opposition demand for bringing CGST and IGST Bills as financial bill and not money bills.

"Government loses nothing by bringing it as a financial bill. I doubt whether a sensitive Finance Minister will reject the demand of all opposition parties. He made a conciliatory and friendly opening remark. I hope the closing comment will also be conciliatory and friendly," he remarked.

At the outset, he said that the govenrment has finally seriously engaged with the opposition for bringing GST.

With regard to petroleum products being kept out of the purview of the GST, he said that the Congress has reservations about exempting products from the ambit of GST but the party agreed to it because the demand was made by the states.

He brushed aside suggestions that there were any differences between Congress MPs in the Lok Sabha and Rajya Sabha over supporting the GST bill.

There were reports that some Congress Lok Sabha MPs had voiced unhappiness that they were not consulted before senior party leaders, including Chidambaram and party's deputy leader in the Rajya Sabha Anand Sharma, negotiated the issue with the government.


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