Ahead of the formal roll-out of the Goods and Services Tax (GST) on July 1, Finance Minister Arun Jaitley spoke to Zee Business about all aspects related to the landmark tax reform.
In an exclusive interview with Mihir Bhatt of Zee Business, the finance minister discussed the benefits that would accrue to the economy from GST, the advantages of multiple tax slabs, and the measures the government would take against offenders.
He said eventually states would have to bring petroleum and real estate under the ambit of GST.
The finance minister said GST will make it easier to do business, bring an end to tax evasion, keep inflation in check and increase Foreign Direct Investment (FDI) and consumption.
He said that the existing tax regime had lacunae which allowed the possibility of evasion. But this will change with the implementation of GST as it comes with "more checks and balances".
"A more efficient system leads to larger compliances," the finance minister said.
Jaitley assured GST will not be inflationary since tax rates were reasonable and spread over the entire basket of products.
"The character of GST is not inflationary but there is a possibility that tax collection could increase," he said.
He also assured that the government had taken into account the fact that states did not have to suffer losses and that new rates had been kept as close to old rates as possible.
Jaitley explained the logic behind multiple slabs. He said there could not be less than four tax slabs (5%, 12%, 18% and 28%) since that could have led to inflation. One or two tax slabs would have meant putting a lower taxed product into a higher category that could have added to inflation, Jaitley said.
The finance minister added that the government did not want to create a situation where the poor and rich would pay similar taxes. "Products that are consumed by poor must be taxed low while luxury products can be taxed higher," he said.
In an exclusive interview with Zee Business, the finance minister discussed the benefits that would accrue to the economy from GST, the importance of co-ordination between the centre and the states over implementation of the tax and the importance of multiple tax slabs