'Single-slab GST can never be a reality in India'

Former Finance Minister Arun Jaitley on Monday made a case for a two-rate goods and services tax (GST) structure but ruled out a single-slab GST for a country like India, where a number of people are below the poverty line.

“Those who argue for a single slab GST must realise that a single slab is possible only in extremely affluent countries where there are no poor people. It would be inequitable to apply a single rate in countries where there are a large number of people below the poverty line, he said in his Facebook post “Two Years After GST”.

As revenue increases further, it will give an opportunity to policymakers to possibly merge the 12% and 18% slab into one rate, thus, effectively making the GST a two-rate tax, the former minister, who was instrumental in launching a multi-slab GST on July 1, 2017, said.

“The direct tax is a progressive tax. The more you earn, the more you pay. An indirect tax is a regressive tax. In the pre-GST regime, the rich and the poor, on various commodities, paid the same tax. The multiple slab system not only checked inflation, but it also ensured that the aam aadmi products are not exorbitantly taxed. Illustratively, a Hawai chappal and a Mercedes car cannot be taxed at the same rate,” he said.

He, however, cautioned that his argument was not to suggest that the rationalisation of GST slabs was not needed.

“That process is already on. Except for luxury and sin goods, the 28% slab has almost been phased out. Zero and 5% slabs will always remain,” he said.

Jaitley, 66, who opted out of the new government due to poor health, is recuperating at home. He had undergone tests and treatment at All India Institute of Medical Sciences (AIIMS) for an undisclosed illness.

He has surrendered his official residence and moved to his own house in South Delhi.