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GST cuts aimed at consumers, traders; won’t help get votes, says Opposition
The reduction in GST rates on a large number of items comes amid the Modi government’s frantic efforts to reach out to different sections, after the drubbing the Bharatiya Janata Party (BJP) got in the Assembly elections.
From the middle class to the traders, a large section of the voters would from next month benefit from the Goods and Services Tax (GST) tweaks announced on Saturday. But their immediate effect was a political cut and thrust.
In a Facebook post, Congress president Rahul Gandhi took a jibe at Prime Minister Narendra Modi. “Modi ji’s Gabbar Singh Tax had ruined small and medium traders, snatched away jobs from lakhs of people. But Modi’s heart didn’t melt. There was no change. But now, worried over the mandate of the people in the three states, Modi is trying to change Gabbar Singh Tax to GST,” he posted.
Gandhi added, “People can understand everything. Gabbar, now you will be gone.”
The reduction in GST rates on a large number of items comes amid the Modi government’s frantic efforts to reach out to different sections, after the drubbing the Bharatiya Janata Party (BJP) got in the Assembly elections earlier this month. The government is also planning a series of measures in the farm and rural sectors. While the political urgency might be palpable, at least to Opposition leaders, economists have justified the rate cuts purely on financial grounds. One of them said the government might be following the Arthur Laffer argument that the more an activity is taxed, the less the revenue generated and the less it is taxed, the more the revenue generated. “It must be based on some empiric. This is a move towards rationalisation of taxes and a small step towards a two-rate system in the GST structure,” said NR Bhanumurthy of the National Institute of Public Finance and Policy.
Modi has possibly been able to take initial political advantage of the GST rejig as he indicated at an event on Tuesday that further simplification of GST was on the anvil. “The GST system has been established to a large extent and we are working towards a position where 99% things will attract the sub-18% GST slab,” Modi had said, igniting a war of words.
Read more| Full list of items set to get cheaper after GST Council tweaks tax slabs
In a tweet, Gandhi quickly reminded him of the Congress’s original demand for lower tax rates. “Has finally jolted Narendra Ji from his deep slumber on Gabbar Singh Tax. Though still drowsy, he now wants to implement what he had earlier called the Congress Party’s, “Grand Stupid Thought”. Better late then never Narendra Ji!”On Saturday, the tax cuts on video games, cinema tickets, power banks of lithium ion batteries, digital cameras and video camera recorders were seen as a clear sign of reaching out to the young population.
The cuts on TVs with screen size of upto 32 inches, walking sticks, uncooked or frozen vegetables in containers, economy class air fares were relief for the middle class and women. Aware of the growing discontent among traders — the BJP’s core vote bank in many states — the government also took steps to ease their GST returns process. The GST Council has proposed to extend the deadline for furnishing returns till March 3 and declared that a new return filing system will be brought from April 1, 2019. Senior politician and Rajya Sabha MP Amar Singh quipped that these decisions should have been taken before the Assembly polls.
“I welcome the recent #GST move of my good friend @arunjaitley introduced during #GSTCouncilMeet. I believe this should have been taken before MP, Rajasthan & Chhattisgarh polls,” he tweeted. A senior economist from a top-ranking financial institution, who did not wish to be named, pointed out that currently the GST revenue shortfall is around Rs 1 lakh crore.
“Apart from the political motive, the only possible reason behind the tax rate cut is the Arthur Laffer curve argument. The government must have seen that when tax rate is 28% or 18%, people have tried to evade and purchase goods in cash.”
