Free Press Journal

Demonetisation riles opposition, may rock GST boat


New Delhi: Opposition parties gearing up to take on the government on its demonetisation move during the winter session of Parliament has placed a question mark on the future of the proposed Goods and Services Tax (GST).

The government has targeted implementing the GST across India from April 1, 2017.  The Congress party said on Monday that it will oppose GST in the upcoming winter session if four slabs of taxation up to 28 per cent are introduced.

“For the country’s development, we are in favour of the GST. But the doubts Congress Vice President Rahul Gandhi and other Congress leaders had are now proving to be true,” said Congress spokesperson Randeep Singh Surjewala.

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The Congress party has always maintained that the 18 per cent cap on GST should not be increased, as it will lead to further inflation and people will suffer, he added. At its previous meeting here earlier this month, the GST Council, chaired by Finance Minister Arun Jaitley, decided on a four-slab tax rate, but the meeting could not arrive at a decision on the issue of dual control, or cross-empowerment, on who will exercise control over GST assessees — the Centre or the states.

At the end of the meeting, Jaitley called for a political push for resolution of the contentious control issue and fixed November 20 for an informal meeting in this regard.  Council members are consulting on four draft bills — Central GST, State GST, Integrated GST and state compensation matter for revenue losses — which will have to be passed by Parliament and state assemblies after the Council approves them.

The target rollout of GST will depend on the passage of the Central GST and the Integrated GST (IGST) bills in Parliament and the state GST bills by the respective states.  GST is a single indirect tax that proposes to subsume most central and state taxes, like the value added tax, service tax, central sales tax, excise duty, additional customs duty and special additional customs duty.

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Parliament and state assemblies have the right to accept, or reject, the Council’s recommendations in their GST Bills. India Inc has pitched for an 18 per cent standard rate on the ground that this rate will generate adequate tax buoyancy without fuelling inflation.

The vociferous opposition to demonetisation, mounted by parties like Trinamool and Aam Aadmi Party, on grounds of inconveniencing the public, has also raised apprehensions about law and order issues arising from the move. Speaking at a public meeting in Goa on Sunday, Prime Minister Narendra Modi said rumours of “salt shortage” were being fanned to sabotage the scheme.

“Who uses a Rs 1,000 note to buy salt,” Modi asked his audience.  Uttar Pradesh Chief Minister Akhilesh Yadav wrote to Modi urging him to extend the last date for acceptance of Rs 500 currency notes to November 30. He said currency shortage is causing law and order issues in some districts of the state.

“The situation has turned so serious in some places that despite proper administrative arrangements, law and order problems have erupted in some districts,” the Chief Minister wrote.

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Meanwhile, international consulting firm Deloitte has said in a report that demonetisation of Rs 500 and Rs 1,000 notes will hurt agriculture and informal sector workers and disrupt India’s consumption patterns for at least the next quarter. Instead, sectors like e-commerce, payment banks and payment gateways will gain as the volume of transactions using cashless methods will increase in the coming months, the report said.

“Domestically, there could be some turmoil as the effect will be disproportionately felt by the lower and upper income classes,” the Deloitte report said.