Too many GST rates could be disastrous: P Chidambaram

Too many Goods and Services Tax (GST) rates would be “disastrous”, opined P Chidambaram, former Union Finance Minister on Monday.

Chidambaram was one of the guest speakers at a conclave organised by IIM Calcutta and Observer Research Foundation (ORF). However, the former Union Minister advocated for reduction of rates in the new indirect tax regime.

“A well-designed GST is expected to have a standard rate, plus and minus standard rate. That latitude is interpreted to me that we will have multiple rates - zero to 100 - that’s not GST. That is simply existing VAT rates in a new shape,” he said.

“We sincerely hope that we do not misinterpret the design of standard, standard minus and plus rates of GST. We cannot have 20 rates..., it will be fooling the country,” Chidambaram said.

Chidambaram, however, added: “Better counsel will prevail and they will be able to reduce the number of rates to three or so.”

He also said that the GST would be slightly inflationary in the first year. The rate of service tax is 12-14 per cent. “Whatever the standard rate be, it will raise the service tax rate,” he further said, adding that unless it will be compensated by lower rate of goods, it will be inflationary.