GST rate will go up if Kejriwal keeps luxury item out of budget: Jaitley

New Delhi:Union Finance Minister Arun Jaitley on Monday said Delhi Chief Minister Arvind Kejriwal`s `zero tax` budget that aims to rationalise the Value Added Tax (VAT) structure and keep luxury items out of the proposed GST, will automatically lead to the standard rate of GST going .

Inaugurating a CII Annual Session here, Jaitley said, "I have read the comments of the Union Territory of Delhi that luxury goods like gold should not be taxed.

A Union Territory which taxes skimmed milk, which taxes almost every alternative food product, which taxes even mithai and sweets.

If I keep a luxury item out of the proposed GST then the standard rate of the GST itself has to go up.

"Jaitley warned that maintain the rate between 16-18 percent would become extremely difficult if luxury goods are to be kept out of the GST itself.

"And therefore, the debate has to mature to see what is the impact of each step in the larger interest of the economy," he added.

Deputy Chief Minister Manish Sisodia had last week presented a `zero tax budget` that aimed at rationalising Delhi`s Value Added Tax (VAT) structure.

The budget implies cheaper sweets, namkeen, watches, readymade garments, shoes and school bags, even as the government continues to focus on education, health and transport sectors.Sisodia, who also holds the finance portfolio presented a Rs 46,600 crore annual budget, with plan expenditure at Rs 20,600 crore, of which Rs 4,645 crore (23 per cent) was allocated to education, Rs 3,943 crore (19 percent) to transport and Rs 3,200 crore (15 percent) to health sector.

The government has also proposed a rationalised structure for Value-Added Tax (VAT), which is likely to make some items cheaper.

"The government is committed to reducing tax arbitrage and it will attempt to keep a uniform rate with neighbouring states.

For several items such as sweets, namkeen, watches and readymade garments, the lower tax rate in neighbouring states was causing erosion in our tax revenue.

We have made efforts to remove such imbalances in our VAT structure," he said.