One GST Rate Not Possible, Next Reform After Compliance Improves: Arun Jaitley

New Delhi: Finance Minister Arun Jaitley today said it is not possible to have one GST rate as the country has vast disparities, but assured investors that government will undertake further reforms after an improvement in tax compliance standards. A single rate of GST in India can’t work at the moment due to vast disparities in the country’s society, he said while replying to queries from the audience at the India-Korea Summit here.

The next stage of reforms will start once India becomes a significant tax compliant society, Jaitley said. After we are able to improve the compliance levels the other stage of reform will begin. For example, we have two standard rates and in the long run, I do see them merging into one. For that to happen it will take some reasonable time that is when the compliance levels start moving up, said the Minister.

On the compliance burden of the GST, Jaitley said it was a little heavy but the process would ease on account of the initiatives being undertaken by the revenue department. At the moment we are coming out (with norms). It is almost in the final stages of its preparation, where compliances are going to be made simpler itself, Jaitley said.

The second factor is that in a society like India where you still have a significant population which is below the poverty line or still deprived, a single rate in India can’t work at the moment, he said.

He said that the reason behind India starting off with multiple rates was that the country had 17 taxes and 23 cesses which were amalgamated into the GST. He pointed out that the 28 percent tax bracket has been significantly thinned and argued that a luxury good cannot be taxed at 5 percent and there has to be a differential rate in a society with economic disparities like in India.

Answering questions on the banking sector, the minister admitted that banks have become a little more cautious in the last few years as they have been on the receiving end of some of their clients. To a query apparently related to Korean mining major Posco's investment in Odisha, Jaitley said: Let me assure you that many of these were problems of a historical legacy and for the last few years most of these if not eliminated have certainly come down.

Therefore this old legacy problem, the kind of problem that you mentioned with regard to Odisha investment, I don’t foresee in today’s India that kind of a history ever being repeated. Addressing the Summit organised by CII, he said there is a sea change in the attitude of states also, owing to competition with each other.