The Congress on Monday reiterated its demand that the GST should be capped at 18% so that it doesn’t become “inflationary” even as it criticised the BJP-led NDA government for not doing the “homework” before getting the bill passed in Parliament.
Citing the examples of Malaysia and Canada, the Congress also asked the government to keep in mind that similar laws across the world have failed as they turned inflationary.
“It is, therefore, imperative to fix the tax rate keeping in mind the interests of the common people. It has to be low to prevent distortion,” senior Congress leader M Veerappa Moily said. “That is very important because it will be consumers who will end up paying higher rates. Inflationary trend will come up and then even the best reforms fail.”
Moily reminded the government of MODVAT (modified value added tax), a tax structure, introduced by the then finance minister VP Singh in 1986 “without proper preparation”.
As a result, he said the excise duty related to GDP declined from 4.8% in 1985-86 to 3% in 1988-89. “So, even a good measure sometimes can boomerang on the economy of the country,” the Congress leader said.
Moily said the GST should not be in “vested interest” of the Centre and states and that the government should specify the “neutral agent” who will ensure that the common man does not become a casualty of the new indirect tax regime.