Lowering of taxes on goods, services over a year cost Rs 70,000 cr: Jaitley

Reduction of tax on goods and services under the Goods and Services Tax (GST) regime has cost the Government Rs 70,000 crore, Union Minister Arun Jaitley said on Friday. He also said this is the time to celebrate replacement of the ‘Congress Legacy Tax’ with a ‘good and simple tax.’

“If the entire category of all the slabs is taken, the past one year has seen reduction of tax on 384 commodities, with no increase on a single product. India has never witnessed such mass tax reduction since Independence. Lower rates and higher collection is the result. Similarly, in the services category, which has now become part of GST, on four different occasions 68 different categories of services witnessed their rates being reduced,” Jaitley said in his Facebook post.

His remarks have come days after the GST Council decided to lower duty on around 50 product categories, including 17 categories of white goods such as small TVs, fridges and washing machines. Overall, duty was either lowered or exemptions were given to over 100 products. The council also rationalised taxes on many services, including hotel room tariffs. All the new rates have come into effect from Friday. With the latest round of rate reductions, only 32 items remain in the 28 per cent category, the highest tax slab.

Jaitley said the day GST was implemented, several items which were proposed to be put in the 28 per cent category (where 31 per cent items were adjusted) were brought down to 18 per cent. On November 10, within four-and-a-half months of GST implementation, 177 items and on July 21, 2018, GST on another 15 items was brought down. Even in other GST meetings on individual basis, several items were considered and brought down.

“Today, the 28 per cent category is being phased out. The bulk of items remaining in this category are luxury items or sin goods. Other items outside the luxury–sin goods category are cement, air-conditioners, large screen televisions and a handful of others, the Minister said, while expressing the hope that with a further expansion of revenues, these items may also witness a change of category. He also claimed that within a record period of 13 months, the GST Council has almost phased out the 28 per cent category. “It is only a matter of time that the final obituary of the ‘Congress Legacy Tax’ is written. Only the luxury-sin tax would remain,” he said.

The Minister termed the ‘pre-GST tariff’ a ‘Congress Party legacy’. The standard rate for central excise plus VAT plus CST (Central Sales Tax) was ‘12% + 14% + 2%’. If the cascading effect of tax on tax was added, the eventual tax payable on a commodity was 31 per cent. Items of household use from mineral water, hair oil, toothpaste, soap, dairy, to construction material and white goods were all taxed at 31 per cent. “The total number of goods falling in this category was 235. This 31 per cent tax was the Congress Party’s gift imposed on India,” he said.

Amending anti-graft legislation

Another reform that took place this week was the passage of an amendment in the Prevention of Corruption Act. Jaitley said a fundamental flaw had been corrected. “The wide definition of corruption, which is referred to as ‘criminal misconduct’ in the original Act, had the potential to include in its ambit, not merely dishonest decisions taken with a dishonest intention, but as the history of its functioning shows, could also include honest decisions taken by honest individuals, which subsequently turned out to be erroneous,” he said.

According to the senior BJP leader, based on earlier provisions, a loan given by an honest bank management in accordance with the rules, would get subsequently questioned if the recipient of the loan defaulted and the entire process of the banker-lender relationship was referred to an investigative agency. The somewhat loose language of the Act enabled investigating agencies to shed their professionalism and followed the investigators’ golden rule ‘when in doubt, file a charge sheet’.

That is why many honest persons were harassed and eventually never convicted. Reputations were ruined and a fear amongst decision makers was created. This resulted in a tendency where civil servants would postpone decision-making to their successors, rather than take the risk upon themselves.

“The new Bill, besides correcting the somewhat loose language, now requires the element of mens rea i.e. the dishonest intention to be proved for an offence of criminal conduct to be made out. This will ensure that bonafide actions of public servants are not called into question,” he said.

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