GST getting states money for development: Jaitley TNN | Jul 2, 2018, 03:26 IST

01 Jul 2018

NEW DELHI: The GST is expanding the tax base of the less consuming states which will provide more resources for them for development purposes, Union minister Arun Jaitley said on Sunday, exuding confidence that tax buoyancy will increase as more anti-evasion measures are put in place.
“Today the states are getting a 14% increase on the tax base of 2015-16 with the help of the compensation cess. Eventually, when the blocked IGST is gradually released to the Centre and states, even without the compensation cess, most states will cross the 14% growth target,” Jaitley said.
This would mean that states would have more money to spend in the lead up to the 2019 general elections.
Jaitley said the impact of GST on direct tax was already visible as those who had to disclose business turnover were now having to disclose their income. “GST will strengthen the country’s tax base for the medium term, adding up to an additional 1.5 percentage points of GDP,” he said.
He also said that as tax collections improved, more products from the 28% category could come down. “Only sin products and luxury goods can remain there. There will also be a scope again, depending on the collection going up, to merge some of the mid category slabs but for that we have to see the progress of the new tax regime and possible upward movement in collections,” Jaitley said. The minister, who is recovering from a kidney transplant, addressed the GST Day celebration via video-conference.

He termed Congress chief Rahul Gandhi’s suggestion for a single slab as “a flawed idea”. “A single slab GST can function only in countries where the entire population has a similar and a higher level of paying capacity. Being fascinated by the Singapore model is understandable but the population profile of a state like Singapore and India is very different,” Jaitley said.“Singapore can charge 7% GST on food and 7% on luxury goods. Will that model work for India? Since GST is a regressive tax, the poor have to be given a substantial relief. Thus, most food items, agricultural products and aam aadmi-used products have to be exempt. Some others have to be taxed at a nominal rate. Referring to the inclusion of petroleum products under GST, Jaitely said Congress-ruled states don’t seem to be ready for it. “UPA kept petroleum products permanently outside GST. On the contrary, we brought them back into the Constitution as levyable to GST and can gradually impose GST when the GST Council so decides,” he said.
Finance minister Piyush Goyal said the reform had ended tax evasion by simplifying tax administration and bringing a transformation in the culture among trade and industry in the country