‘Mercedes and Milk Cannot Have Same Tax’: PM Modi on 1 Year of GST

GST broke the culture of Inspector Raj, and brought down prices said Modi in an interview with Swarajya.

Prime Minister Narendra Modi. 

(Photo: Reuters)

Prime Minister Narendra Modi on Sunday, 1 July ruled out a single tax rate under the GST, saying Mercedes car and milk cannot be taxed at the same rate and accepting Congress' demand for a uniform 18 percent rate would lead to a spike in prices of food and essential items.

Modi said the Goods and Services Tax (GST) has within one year of its launch led to over 70 percent jump in indirect taxpayer base, having demolished check-posts and merged 17 taxes and 23 cesses into one single tax.

Making Taxation Simple

The new tax regime, which subsumed central levies like excise duty and service tax and state taxes like VAT, is aimed at making indirect taxation "simple" while eliminating the Inspector Raj, the Prime Minister said, adding the GST is an evolving system which is calibrated based on feedback from state governments, trades and other stakeholders.

It would have been very simple to have just one slab but it would mean not having food items taxed at zero percent. Can we have milk and Mercedes at the same rate? 

PM Modi

“So, when our friends in Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5 percent, at 18 percent," PM Modi said in an interview to online news magazine Swarajya.

48 Lakh New Enterprises Have Registered Since the Launch of the GST

PM Modi, according to a part-transcript of the 45-minute interview posted by Swarajya, said that against a total of 66 lakh indirect taxpayers registered since independence, 48 lakh new enterprises have been registered since the launch of the GST on 1 July, 2017.

“Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers if GST were indeed very complex?" he asked.

Check-posts across the country have been abolished and there are no more queues at state borders. Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country. Would this be happening if GST was complex?

To a query on criticism of GST implementation, he said the new tax regime was a massive change, requiring a complete reset of one of the world's largest economic systems.

"The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system.

Ending Inspector Raj

“There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time," he said.

The GST, he said, has seen Indian cooperative federalism at its best. "We consolidated the states and developed proactively a consensus, where earlier governments had failed."

The Prime Minister said earlier many taxes were hidden and under the GST, "what you see is what you pay."

The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have zero percent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down.

“Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. Large number of items of daily usage are either exempted or in 5 percent slab. Some 95 percent items fall in or below the 18 percent slab," he said.

The GST, he said, has been designed to eliminate Inspector Raj with the help of information technology. From returns to refund, everything happens online, the PM Modi said.