West Bengal Finance Minister Cautions Centre Against Hiking GST Rates
The West Bengal finance minister has said tweaking GST structure would be highly inflationary and adversely impact the common man.
West Bengal Finance Minister Amit Mitra has opposed the idea of hiking goods and services tax rates to improve revenue from the new indirect tax, calling the move counterproductive.
In a letter to Union Finance Minister Nirmala Sitharaman, Mitra, citing media reports, said the proposal to increase compensation cess is “highly regressive”, and would start a trend of imposing cess on goods and services arbitrarily to increase revenue.
That comes as the GST Council is set to review changes to the indirect tax on Wednesday, with some states suggesting that the exemption offered on various products and services should be removed, and compensation cess on luxury items should be hiked. Other suggestions include levying cess on goods taxed at 18 percent to improve the GST collections. This is being considered as GST revenue is on the decline and compensation to states is rising.
Instead of increasing GST rates and the compensation cess, the government should focus on anti-evasion and fraud detection measures to mobilise resources and find ways to give relief to the industry by simplifying GST processes, he said. “We should avoid setting a precedent which will imperil the structure of GST in future.”
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Mitra said removing exemption on goods would undo the hard work that was put in to identify such items, and will “adversely” impact the common man. The exemption list at present comprises items like foodgrains, unpacked cereals, oilseeds, curd, puffed rice, among others, that are ‘integrally connected’ with the daily life of common people, he said.
As the economy is going through a slowdown, backed by sluggish industrial growth due to slackening consumer demand, and rising food inflation, removing items off the GST exempted list, and increasing cess on luxury items will be highly detrimental, Mitra said.
Increasing the tax rate on items that are currently taxed at 5 percent—such as pulses, edible oil, tea, among others—to 6 percent would be highly inflationary and worsen the existing macro-economic situation for the common man, he said.