Single GST rate is not possible, says Modi

New Delhi: Prime Minister Narendra Modi has categorically ruled out a single tax rate under the Goods and Services Tax (GST), saying that a Mercedes car and milk cannot be taxed at the same rate. He said that accepting the Congress Party’s demand for a uniform 18 per cent rate would lead to a spike in tax on food and essential items.

Mr Modi said the GST has within one year of its launch led to a over 70 per cent jump in the indirect taxpayer base, demolished checkposts and merged 17 taxes and 23 cesses into one single tax.

The PM, according to a part-transcript of the 45-minute interview posted by Swarajya magazine on its website, said against a total of 66 lakh indirect taxpayers registered since Independence, 48 lakh new enterprises were registered since the launch of GST on July 1, 2017.

The new tax regime, which subsumed Central levies like excise duty and service tax and state taxes like VAT, is aimed at making indirect taxation “simple” while eliminating the “inspector raj”, he said, adding that GST was an evolving system that is calibrated based on the feedback from state governments, traders and other stakeholders.

“It would have been very simple to have just one slab but it would have meant we could not have food items at zero per cent tax rate. Can we have milk and Mercedes at the same rate? So when our friends in the Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5 per cent, at 18 per cent,” he said in the interview.

“Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers if the GST were indeed very complex?” he asked. “Checkposts across the country have been abolished and there are no more queues at state borders. Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country. Would this be happening if the GST was complex?”

To a query on criticism of GST’s implementation, he said the new tax regime was a massive change, requiring a complete reset of one of the world’s largest economic systems. “The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time,” he said.

The GST, he said, has seen Indian cooperative federalism at its best. “We consolidated the states and developed proactively a consensus, where earlier governments had failed.”

The Prime Minister said earlier many taxes were hidden and under GST “what you see is what you pay”.

“The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have zero per cent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, the total tax levied has been reduced in most cases. A large number of items of daily use are either exempted or in the 5 per cent slab. Some 95 per cent items fall in (or) below the 18 per cent slab,” he added.