Government open to removal of 1% inter-state levy under GST: Arun Jaitley


Finance Minister Arun Jaitley on Monday said the government is open to removing the additional 1 per cent tax to be levied on the inter-state movement of goods under the GST (Goods and Services Tax) regime, but did not see much logic in other demands of the Congress party.

He said many regional political parties including UPA allies DMK and NCP are supporting the indirect tax reform. Congress has made passage of GST conditional on three demands: Removal of 1 per cent additional tax, specifying 18 per cent GST rate in the constitutional amendment bill and setting up a dispute resolution body.

 “Except for the 1 per cent additional tax for 2 years on inter-state transactions which was done to (help) the manufacturing states and that is something which I have already said I am open about, because the rest of the GST Bill were verbatim the same what the UPA had introduced. And therefore one has to analyse these afterthoughts (of Congress),” he told reporters at an event organised by Indian Women Press Corps .
Jaitley said he hopes a consensus would emerge on these issues and he is in discussion with the political parties. “I certainly would be keeping the discussions with them on. I always said that my preference is that a consensus must emerge because all state governments across political complexion have to implement it and therefore consensus is the better way. And I do hope it moves in that direction. If consensus doesn’t emerge, then the only other alternative is the Parliamentary process, we will ask the Rajya Sabha and take a view on it,” he said.

He said regional parties were making noises in favour of GST. “So, whether it is SP or BSP in Uttar Pradesh, JD(U) or JD in Bihar, the Left in West Bengal and Kerala, the Trinamool in West Bengal, BJD…, each one of the UPA partners from DMK to NCP is making strong noises in support.”

The Goods and Services Tax (GST) Bill, which has been approved by the Lok Sabha, is pending in the Rajya Sabha because of stiff resistance by the Congress, the largest party in the House.

On the prospects of economic expansion, Jaitley said a number of factors including moderate oil prices, good monsoon and reduced stress in sectors like steel and highways could add to growth rate. “I would say if you look down the tunnel, moderate level of oil price, (good) monsoon and the consequential impact of reduced sectoral stress in steel, highways, sugar, and power and plausible impact over next few quarters over balance sheet of banks, these could add a positive and therefore can add to your present growth,” he said.

He said it may be difficult to get peak growth rate in the backdrop of global tailwinds such as slower global growth, shrinking international trade among others. “You get peak growth rates when global tailwinds are very strongly behind you when those tailwinds are not there on the contrary there are hostile headwinds from the world, then to touch those peak rates are extremely difficult,” he said.

Speaking on likely changes to tax treaty with Singapore, in line with the amendments done with Mauritius, Jaitley said “(Singapore) is a separate sovereign state, it (Mauritius treaty) does not ipso facto automatically extend. The principles will have to be applied, but applied through a process of renegotiation.”

He did not specify any timeline for the renegotiation with Singapore. “I am not giving it a timeline, because if you recollect the renegotiation process of the Mauritius treaty started first in 1996 and then it continued till about 2002 and then there was a pause. Singapore was entered into in 2005 and one of the covenants of Singapore was provisions of what happens in Mauritius treaty would extend to it…since it’s a discussion between two sovereign states, I cannot unilaterally fix its timetable. But sooner or later that process will commence and hopefully conclude,” he said.


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