Senior Congress leader and former Union Finance minister P Chidambaram has said that the Goods and Services Tax rolled out by the government will put a burden on the common man and hugely affect small, medium and micro businesses and entrepreneurs while being inflationary with multiple rates. In a scathing attack on the legislation in its current form, Chidambaram said it was not the GST the Congress had desired. “This not the real GST that the Congress had desired and the ideal GST devised by experts. Nothing can be a worse legislation than this,” he said.
Chidambaram, who was the first to include the GST proposal in the Union Budget as Finance Minister, said the anti-profiteering provision in the new law will be an instrument of harassment in the hands of officials, adding that 80 per cent of all goods and services will bear a tax and prices will be higher. "There will be inflation. What is the government going to do about it?" he asked.
He said small, medium and micro scale entrepreneurs and traders will be affected in a "big" way because they are not ready for the roll out of the new law. "They asked for more time. They have been denied time," he said.
Chidambaram said a "peculiar arrangement" has been made in the name of compromise and the law was being hastily implemented while the traders and business wanted some more time because they were not prepared for it yet. The consequences of the new law will be known only after some time, he added.
Chidambaram said the UPA government had done all the homework for the law and at that time the BJP had bitterly opposed it. "The same BJP, when in opposition, had protested against the GST tooth and nail. No one can deny this fact," he said.
He said ideally GST meant one tax and the Congress had accepted the concept of a standard rate of 15 per cent along with a standard plus or standard minus rate. "We had said at any rate the tax cannot be beyond 18 per cent. We also accept the fact that there cannot be one tax rate in view of the current economic situation."
Chidambaram said against the concept of one rate, there are multiple rates now -- zero per cent, 2.5 per cent, 3 per cent, 5 per cent, 15 per cent, 18 per cent, 28 per cent and 40 per cent.
"It is still far away from being a GST. It is still not GST," he said, adding that even the Chief Economic Adviser has favoured only a 15 per cent rate.
The former Finance Minister said the traders still do not know which GST would cover them and who is levying the tax on them -- whether the Centre or the state. "Ninety per cent will be under CGST and 10 per cent under SGST. A trader in Karaikudi will wonder whether he will come under the central government or state government officials."
On the compliance front, he said once a trader does business in one state the compliance in the form filing returns would amount to 36 plus one returns, and if he does business in seven states, then it will amount to 37 returns in each state. The trader has to have a big machinery to keep up with compliance requirements. "This is the biggest shortcoming in the new law," he said.
Chidambaram contended that many products like petroleum, electricity and alcohol have been kept out of GST.
"Petroleum and electricity constitute 35 to 40 per cent of the economy which is out of GST," he said, adding there will be two taxation systems -- one old that includes customs, excise and sales tax covering these products, and the other new.
The anti-profiteering provisions will be an instrument in the hands of the officials and "one knows what will happen if an instrument of harassment is given in the hands of officials".
This provision, Chidambaram said, is a mockery and has been made by those who do not understand market economics. "In market economics, one trader will not price the product higher when someone else is selling it at a lower rate and lose business. But the officials can question the trader selling it at a higher rate and harass him," he said.