GST Shift "Smoothest, Politically Safe": Arun Jaitley's Review 2 Years On

Former Union Minister Arun Jaitley today said the Goods and Services Tax -- the flagship reform of the Modi 1.0 government which completes two years today -- has been both consumer and assessee friendly. The transformation has proved "one of the smoothest". That it was "politically safe" was proved by the BJP's performance in Gujarat, particularly Surat, which had seen protests over the GST, wrote Mr Jaitley, who had been instrumental in introducing the "One Nation One Tax" as the country's finance minister.

"The BJP won all the Assembly seats in the Gujarat poll in Surat. In 2019, the BJP won the Surat seat by the highest margin in the country," he wrote in a blog titled "Two Years After GST".

Mr Jaitley has taken time off from the second government formed by PM Modi on health grounds. He has been replaced by Nirmala Sitharaman, the former defence minister, who would be presenting her first budget next week.

The "One Nation One Tax" system, Mr Jaitley wrote in the review, has widened the assessee base from 65 lakh to 1.20 crore and steadily widened the revenue base.

"In the eight months of 2017-18 (July to March), the average revenue collected per month was Rs.89,700 crore per month. In the next year (2018-19), the monthly average has increased by about 10% to Rs.97,100 crore," wrote Mr Jaitley.

Regarding the states' doubts about the future, he wrote: "Already after the second year, twenty States are independently showing more than a 14% increase in their revenues and the compensation fund in their case is not necessary".

In a dig at the Congress, which had been a staunch critic of the implementation of the GST and the various tax slabs, he wrote, "Those who argued for a single slab GST must realise that a single slab is possible only in extremely affluent countries where there are no poor people. It would be inequitable to apply a single rate in countries where there are a large number of people below the poverty line".

The multiple tax slabs, he said, "not only checked inflation, it also ensured that the Aam Aadmi products are not exorbitantly taxed. Illustratively, a Hawai chappal and a Mercedes car cannot be taxed at the same rate".

But he also said some rationalisation is still needed and the process is already on.

"Except on luxury and sin goods, the 28% slab has almost been phased out. Zero and 5% slabs will always remain. As revenue increases further, it will give an opportunity to policy makers to possibly merge the 12% and 18% slab into one rate, thus, effectively making the GST a two rate tax," he wrote.