States can’t keep GST rate high: FM

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New Delhi: Amid the debate over the GST rate, finance minister Arun Jaitley said the levy would be a “minimum workable rate” as no state could annoy voters by keeping it high and yet resources were needed to meet development spend.

“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-ontax,” Jaitley said, while replying to a debate on the Constitution Amendment Bill to rollout the new tax regime.

The minister told Lok Sabha that state government such as Kerala had suggested that the rate of 17-19% proposed by a panel headed by chief economic adviser Arvind Subramanian was not feasible. “The CEA made a presentation before state FMs and every FM said their calculation was different. The opinion needs to converge and then GST Council will decide. Your FMs will also be there in the GST Council… Ask your FMs if they will survive at 18, 19, or 20%. There were two views – one of the CEA and another of the states. That cap of 2, 3, 4% has to be converged. Kerala FM says 22%, some say 20%,” Jaitley said in response to demands from the Congress party that the GST rate be capped at 18%.

The minister said that the issue of capping the rate was never discussed while the UPA was in power but added that the GST Council will decide on the rate based on inputs from all states where major political parties are represented.

Like the Rajya Sabha, the minister did not give an assurance on the GST legislation being a Money Bill as was being demanded by Congress.”…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 any way , what is within the definition of Money Bill, will be a Money Bill otherwise it is not a Money Bill,” he said.