Moneycontrol
May 20, 2017 01:03 PM IST | Source: CNBC-TV18

GST: No scope for rethinking July 1 deadline, says Arun Jaitley

Speaking to CNBC-TV18, Finance Minister Arun Jaitley said ministers from various states have urged him not to budge on the deadline for rolling out the new tax regime.


The finer points of India's new tax regime are in place and the government is adamant on its timely roll-out.

Speaking to CNBC-TV18, Finance Minister Arun Jaitley said,"I think we are in a state of readiness. Minister after Minister has met me from the states and said do not blink, stick to July 1."

He said that there is no scope for rethinking the July 1 deadline.

The Goods and Services Tax (GST) Council had on Thursday fixed tax rates on 1211 items and released the final list of GST rates for 98 categories of goods.

On Friday the GST Council also decided to place services under four slabs—5, 12, 18 and 28 percent— compared to the current uniform 15 percent levy on all eligible services.

Below is the verbatim transcript of Arun Jaitley's interview.

Q: What has been the overall strategy in terms of the rate fitment? The major takeaway that we understand is that you are trying to keep inflationary pressures as low as possible and possibly the cost of some revenue implications are down the line?

A: There is a twin object and the twin object is that revenue neutrality should be maintained without it being inflationary in character. Now when one attempts to bring a reconciliation between these two objectives, obviously we have reduced the level of rates we are bringing in many of the goods. Even in services, we have had a graded system and now, the benefit of the input credits which services will get, so the rates will be kept in check.

If you take the weighted average of goods and services, I am quite certain it will be lower than what it is at present. But then the object of GST was it is a more efficient system. It is a system which checks evasion. It is a system which will boost tax collection. So, a more efficient system boosting tax collection will cover up for all the reductions which have been made. I am quite sure that we will be able to achieve the twin object of checking inflation and also maintaining revenue neutrality.

Q: Broadly speaking, a smaller question here, the decision to levy a cess on small cars and mid-segment cars was not on the anvil earlier. What happened yesterday?

A: First of all, there is erroneous media report that small cars will more. They will not. The existing rate with all the cascading effects is 31 percent and 29 percent and therefore the existing rate is being maintained to the dot and therefore, the existing rate continues as far as the small or mid-segment cars are concerned. This was a conscious decision which was taken by the council.

Read Moneycontrol's full coverage on GST here

Q: Going forward, of course, you have kept a small window open that if need be, we may look at other things, that is more of an enabling provision?

A: Obviously. The council is a permanent body and therefore, we will keep reviewing our experiences and as we review our experiences, we will decide on that basis.

Q: The rates for bullion have yet to be decided. Possibly they may be taken up in the next meeting. What is so far, the thinking, broadly if you may like share?

A: There are two views and there is one view that it is a luxury item, you should have some reasonably tax, the other wanted the tax a little less because if you tax gold then it leads to smuggling. These are the various arguments which are going on and I am sure, as we have taken other decision in the council by unanimity and consensus, we will be able to reach an opinion.

Q: Moving on to services, here again a big step taken in terms of grandfathering the important exemptions, especially healthcare, education. A lot of other sectors you have put in the five percent bracket like railway travel, even economy class travel by planes. Again, the broad thinking here is to protect the consumer.

A: The idea is to protect the consumer. If we had increased the service tax on transportation, low cost transportation for common man in the average cheaper class in the railways is exempted. The other categories, we have kept it at 5 percent because petroleum is a major input and petroleum not being part of the GST, they are not getting the input credit and therefore, whatever you pay will be an absolute payment. Therefore, it was obvious that it had to be kept at the lowest bracket which is 5 percent.

Q: Also, in terms of financial services like banking, insurance, also telecom, 18 percent is the standard rate. Here again, you have made it very clear, the input cost available should actually probably bring down the effective rate slightly lower.

A: All cases, whatever are the inputs which go in, the input costs will be available. If a hotel is paying tax at a particular level, then the machinery the air conditioning, various other input costs that go in will certainly bring down the taxation level. Works contract, 12 percent. But then cement and steel go in to the works and they are taxed at 28 percent, therefore you will get the benefit of those input credits. So, what is optically appears to be a particular rate of services will actually, the effective incidence will be much less.

Decoding: What does GST mean for you?

Q: The earlier understanding was and possibly erroneous understanding that most of these services will go in the 12 and 18 percent bracket. Here again the council has taken the decision to broaden the slabs.

A: We have got certain services like 5-star hotels which if you take the luxury taxes and the service taxes goes up to 30-35 percent at the moment. Now, there was no reason why they should be given a discount at 18 percent. Similarly, betting and gambling at race courses has to be maintained at a higher level, so obviously, you have kept those equity considerations in mind.

Q: Going forward, how confident are we of July 1 as of now because various industry quarters, they were so far worried on the rates.

A: I do not think there is any scope for rethinking.

Q: There is no scope of rethinking on July 1?

A: Yes, I think we are in a state of readiness. Minister after Minister has met me from the states and said do not blink, stick to July 1.

Q: Also in terms of IT preparedness, are we more or less on track?

A: The ministers will be taking a presentation on June 3 with regard to the IT preparedness.

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