Fixing an 18 percent cap on the goods and services tax (GST) rate as suggested by the Congress would lead to a situation where the government would be unable to raise taxes on a host of "sin" products and luxury goods, Finance Minister Arun Jaitley said on Friday."There are sin products (alcohol, cigarettes) that need to be taxed high. There are polluting products and there are luxury items that should attract higher taxes," he said answering queries at the Hindustan Times Leadership Summit here.The GST bill, which seeks to usher in a pan-Indian common market by reforming the country's indirect tax regime, was passed in the Lok Sabha in May, but has been opposed in the Rajya Sabha, where the ruling Bharatiya Janata Party-led NDA does not have a majority.
The Congress maintains that the GST rate should be capped at 18 percent in the constituional amendment bill.Oppositon parties also want the government to remove the 1 percent additional tax aimed to benefit "producing states" like Gujarat and Tamil Nadu.Minister of State for Finance Jayant Sinha said last week that the government is seeking a consensus on the vexed issue of levy of one percent additional tax."There are many opinions on the one percent tax on GST...states have another perspective on this," he told reporters on the sidelines of an event here.
The central government has set the target for GST implementation from April next year, but the bill is currently stuck in parliament, especially over the cabinet's nod to some changes recommended by a parliamentary panel, notably the extra one percent levy to compensate states for potential tax losses.The opposition parties have opposed the extra levy as they feel this would not only push up prices, but also have a cascading effect.