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Goods and Services Tax: There should not be more than three grades of rates, says Chidambaram
October, 25th 2016

Former finance minister P Chidambaram on Monday said that the proposed multiple rate of Goods and Services Tax (GST) would be ‘disastrous’ and similar to the existing VAT.

“A well-designed GST is expected to have a standard rate, plus and minus standard rate. That latitude interpreted to me as multiple rate, zero to 100. That is not GST. It is the existing VAT in a new shape. It is old wine in a new bottle,” he said and added that it should be uniform and should not have various grades and that we need to be aware of the pitfalls of the GST as well.

“If that happens, the government will be fooling the country. There should not be more than three grades. There will be some inflation but in the long-run things will get better,” he said during an interactive session with the students of Indian Institute of Management, Calcutta, on ‘25 Years of Economic Reforms: Retrospect and Prospects’.

Chidambaram said that after a quarter of a century of liberal economy, India still remained an unequal one. He added that inequality needed to be addressed because it breeds discrimination which was not healthy. Talking about the reforms he said, “They were needed but perhaps they are not yet sufficient. We should do whatever we can to make it more effective and fair.”

Talking about the disagreement among states in joining the GST reform, he cited the example of VAT and said that states were sceptical when VAT was implemented but soon they fell in line and accepted it. “GST too may have some opposition but will be accepted eventually,” he said. He added that regional parties were interested in their respective states and so even if they were not opposed to the GST, they would not have the national interest in mind in promoting it.

Asked about black money in the country he said, “As long as there was non-taxable income there will be black money. Large chunks of money earned by a sizable section of our society are not under the tax net. Unless that is ensured black money will be an issue.”

Chidambaram referred to intolerance as a hurdle to the country’s growth. “We must create a humane and tolerant society. Society cannot be prosperous unless it is tolerant to each other, accepts diversity and adopts the philosophy of live and let live. The conflicts as a result of intolerance will hold back the country from becoming rich and prosperous,” he said.

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