Former Finance Minister Arun Jaitley Monday said the 12 and 18 per cent tax slabs in goods and services tax (GST) could be merged going forward as revenues increase, thereby effectively making it a two-tier tax.
Penning a Facebook post on the second anniversary of GSTrollout, Jaitley said as many as 20 states are already showing more than a 14per cent increase in their revenues and do not require the centre to compensatethem for revenue loss arising out of GST implementation.
Jaitley, who in May wrote to Prime Minister Narendra Modiexpressing his unwillingness to be a Minister in the Modi 2.0 government due tohealth reasons, said that most items of consumer use have been brought in the18 per cent, 12 per cent and even 5 per cent category.
The GST Council, chaired by Finance Minister and comprisingstate Finance Ministers, has reduced tax rates over the last two years whichled to revenue loss of more than Rs 90,000 crore, he said.
“Except on luxury and sin goods, the 28 per cent slab hasalmost been phased out. Zero and 5 per cent slabs will always remain. Asrevenue increases further, it will give an opportunity to policy makers topossibly merge the 12 per cent and 18 or cent slab into one rate, thus,effectively making the GST a two rate tax,” he said.
Observing that a sudden reduction of tax rates on allcategories of goods can lead to a massive loss of revenue for the governmentleaving it without resources to spend, Jaitley said “this exercise had tobe done in a gradual manner as the revenues increased”.
In the eight months of 2017-18 (July to March), the averagerevenue collected was Rs 89,700 crore per month. In the next year (2018-19),the monthly average has increased by about 10 per cent to Rs 97,100 crore
“The fear of the states today is that for the firstfive years they get a guaranteed 14 per cent increase. The lurking doubt is asto what will happen after five years? Every state has been paid its share oftax as also from the compensation fund, if necessary. We have just completedtwo years of GST.”Already after the second year, twentystates are independently showing more than a 14 per cent increase in theirrevenues and the compensation fund in their case is not necessary,”Jaitley said.