Mamata Banerjee will not accept rates that hurt interests of states, Bengal's Finance Minister said.
Highlights
- Bengal lists objections to tax rates and July 1 launch of GST
- GST creates a national sales tax, replaces a patchwork of tariffs
- Bengal asks other states to back it at crucial meeting this week
The roll-out on July 1 of the landmark national sales tax or GST has been vetoed by Bengal's Finance Minister, Dr Amit Mitra. As the head of an important committee that combines representatives from different states, Dr Mitra says his opposition to GST should carry some weight - his panel includes 31 finance ministers and in the past has succeeded in forcing changes to the new reform.
However, he says that his team's suggestions are now being ignored and he has urged his counterparts in other states to share their objections at a crucial meeting to be held in Delhi on Saturday with union minister Arun Jaitley.
"Are we ready?" he asked about the 1st July deadline for GST or the Goods and Services Tax, which subsumes a jumble of tariffs applied currently by the Centre and different states. "There is serious doubt about the country's preparedness," he said.
Mr Jaitley has said in the past that the GST, described as India's biggest tax reform since independence, could add as much as 2 percentage points to economic growth. GST creates a unified market of a billion customers and will make business easier.
Four rates have been created for GST (most food items will not be taxed at all):
- 5% - Essential items
- 12% and 18% - Standard goods and services
- 28% - Luxury and sin tax items
In addition to GST, a cess on luxury and sin tax items, in combination with the standard GST 28% rate, is to be finalised.
Dr Mitra pointed out that his boss Bengal Chief Minister Mamata Banerjee has supported GST in the past but will not accept rates that burden the poor or hurt interests of states. As an example, he said, "They had said that rubber and plastic shoes would be taxed at 12 per cent. We have proposed that shoes costing up to Rs 500 should be tax-free. Why should slippers worn by poor people be taxed?"
Referring to the regional film industry, the noted economist said films in Punjabi, Marathi, Gujarati, Oriya and Kannada so far attracted zero per cent tax, while the rate in West Bengal was a nominal two per cent for Bengali films.
"Now the Centre is thinking of imposing a 28 per cent tax. We will fight this. If regional films are taxed at 28 per cent, won't they be finished? Single screens in the district will shut down, people will lose jobs."
He also demanded that like text books, non-text books should also be exempt from GST. Partha Chatterjee, a senior minister in Bengal, also says that "cunning" decisions expose the centre.
"Human hair is exempt for GST. But the moment the hair is bleached and dressed for being sold as wigs or other items, it comes under the 28 per cent bracket. This will hit the livelihood of around 10 lakh people in our state who make both ends meet by dealing in processed hair," said Dr Mitra.
If Dr Mitra is able to rally support from other states, the meeting on Saturday, to be chaired by the union Finance Minister, could provide new points of dispute between the Centre and states. However, with the BJP in power in many states, the July 1 introduction may not be affected.