Too many tax slabs in GST just old wine in new bottle. says P Chidambaram

The proposed multiple rate GST structure will be “disastrous” and nothing more than same old VAT rates in a “new shape”, former finance minister P Chidambaram said on Monday.

“We sincerely hope that we do not misinterpret the design of standard, standard minus and plus rates of GST. We can have 20 rates. It will be disastrous and that cannot be GST, it will be fooling the country,” Chidambaram told an interactive session with IIM Calcutta students on economic reforms.

“A well designed GST is expected to have standard rate, plus and minus standard rate. That latitude interpreted to me as multiple rate - zero to 100 - that’s not GST. That is simply existing VAT rates in a new shape, old wine in a new bottle,” he said.

He said he hoped better counsel would prevail which would reduce the number of rates to “three or so”.

The new Goods and Services Tax (GST) will subsume a number of indirect taxes at the state as well as central level and is targeted for rollout from April 1, 2017.

About states disagreeing and joining the second wave of GST reform, Chidambaram said that even when UPA had implemented VAT, some had not joined initially and they had joined later, and so eventually all states will fall in line.

“Whatever, be the standard rates it will raise service tax,” he said.

At the GST Council meeting last week, there was virtual consensus among states on imposing of the cess, which tax experts and industry have opposed vehemently, saying it defeats the very concept of one-nation, one-tax.

Besides, a four-slab tax structure of 6, 12, 18 and 26 per cent with lower tariff for essential items and the highest bracket for luxury and sin goods also found favour with them but a decision was put off to the next meeting on November 3-4.