Jaitley tries to settle fears, says GST rate wil be minimum

The tax rate under the GST regime will be kept at "minimum workable rate" as no state government can annoy its people by having a higher rate, Finance Minister Arun Jaitley said today in the Lok Sabha which passed the historic legislation to amend the Constitution.

He, however, virtually ruled out an assurance that the GST legislation will not be brought as Money Bill, a key demand of opposition Congress.

Stating that the rate in the new sales tax regime is a matter to be decided by calculations and not by political slogans, Jaitley said GST will bring in an efficient system and help bring down the tax rates gradually.

"They (GST Council) will, of course, try to arrive at a minimum workable tax rate and their effort will be to bring it down from the prevailing rate... Gradually, we will bring it further (GST rate) down because GST will bring efficiency and do away with tax-on-tax," he said, while replying to a debate on the Constitution (122nd Amendment) Bill to pave the way for Goods and Services Tax (GST).

He said the new indirect tax regime, which will subsume all local levies, excise and service tax, will "check leakages, increase tax base for centre and states, eliminate corruption and a cascading effect of tax on tax, reduce tax evasion, and improve ease of doing business."

Jaitley said the Chief Economic Advisor had suggested a band of 16.9-18.9 percent for fixing GST rate. While the NIPFP report had suggested that the rate be kept at 24 percent, some states have been demanding between 20-22 percent.

With regard to Congress demand that subsequent GST related bills should be brought as Finance Bill and not as Money Bill, Jaitley sought to explain why it cannot be done.

"...if it has the ingredient of Article 110 then it shall be deemed as Money Bill. If a ruling party fails to pass a Money Bill, then the government falls. Can you then say that it is not a Money Bill? So the option can work anyway, what is within the definition of Money Bill, will be a Money Bill otherwise it is not a Money Bill," he said.

As per the provisions in the Constitution, a Money Bill is discussed and put to vote only in the Lok Sabha. 

In the GST regime, Jaitley said the manufacturing tax will be lower and states will collect as much taxes as we do presently so that we are able to spend on development.

"Why will representatives from states and the Centre want to put an unnecessary burden on the common man? No government will want to do excessive profiteering as it will create anger among the voters.

"Again no state will want that tax rate be lowered so much that they are unable to pay salary. The 29 states will have that much responsibility as this House has while deciding on the rate," the Finance Minister said.

He said GST Council will decide on the rate and states know that less tax burden should be put on common man. Centre has only one-third vote in the GST Council and states have two-third. Any decision by the Council would be passed by a three-fourth majority.

"This (GST rate) is a matter of calculation and not a matter of political slogans... It is not about them versus us... The Council, which will decide on this (GST rate), will also have eight of your finance ministers," Jaitley told the opposition.

While moving the amendments passed by the Rajya Sabha, he said: "GST will ensure one tax in the entire country. It will result in seamless transfer of goods and services in the country...This is a major indirect tax reform which will in long run will be in interest of the country."

The Lok Sabha, which had already passed the GST Constitution Amendment Bill in May 2015, took it up today again to approve the modifications made in it by the Rajya Sabha last week. The government had moved six official amendments, including scrapping of 1 percent additional tax.

In response to Congress demand about capping GST rate at 18 percent, Jaitley said it was "subsequent thought" and there was no such proposal when the 2011 Bill which was brought in Parliament by the UPA Government.