Mitra’s letter, dated December 16, 2019, that comes ahead of the crucial Council meeting on Wednesday termed move to review exempted list of items “alarming”.
“Exempted list of items had been arrived at after lengthy deliberations spread over a number of GST Council meetings between the union FM and state FMs,” he said adding that the basic principle behind exempting them was that these were consumed predominantly by poor and underprivileged.
The Wednesday’s meeting is expected to discuss report of an officials panel on revenue augmentation measures. Some states have suggested rejig of rate structure as also reducing exempted list of items to boost GST revenues.
“We are in receipt of a letter from the GST Council wherein suggestions have been sought on ‘Review of items currently under exemption’ for shoring up GST revenues. This is alarming, indeed,” he said.
Mitra said the government should focus on further simplifying GST procedures to reduce the compliance cost, besides anti-evasion and fraud detection measures.
“In my view, we should not in any way tinker with the rate structure or impose any new cess at a time when the industry and consumers are going through the most distressing times with ‘stagflation’ knocking at our door (stagnation accompanied by growing inflation),” Mitra said.
ET has seen a copy of the communication to the union finance minister.
“When the economy is passing through a very difficult phase, beset with twin problems, namely sluggish industrial growth due to slack consumer demand and increased inflation specially on food items, any move by the GST Council to either tinker with the exempted goods and services, or increase general rate or to impose cess on certain luxury items will be highly detrimental and hugely counterproductive,” he added.
He put the onus on the Council for finding ways to give relief to the industry to tide over the present crisis, which he said can be done through “further simplification of GST processes and procedures, so as to reduce compliance cost, which has gone up manifold under GST.”
He further suggested that the government should focus on “anti-evasion and fraud detection measures” as a solution to additional resource mobilisation.
He said any intention of the government to increase the basic rate from 5% to 6% would aggravate inflation being faced by the consumers on a mass scale, as the goods falling in this category are considered as basic necessities. “… further worsen the existing macro economic situation for common consumers.”
On the reported move of government imposing cess on luxury items will encourage evasion, and establish a dangerous precedent of arbitrarily taxing goods and services, as a means to increase revenue “in desperation.”