Remove additional tax in GST, need flexibility issues: RBI Governor C Rangarajan

The proposed 1 per cent additional tax on inter-state sales should not be implemented as it is against the spirit of Goods and Services Tax (GST), former RBI Governor C Rangarajan said.

"I think GST is a good measure. Certainly that 1 per cent tax, that was contemplated, goes against the spirit of GST, and that should not be implemented," Rangarajan said.

Finance Minister Arun Jaitley had last week hinted at accepting the Congress party's stand on scrapping 1 per cent additional tax, but said that their demand for incorporating the GST rate in the Constitution Bill was not agreeable.

Congress has been stalling the passage of GST Bill over its demand for a simple GST regime where states do not have powers to levy additional tax over an 18 per cent tax rate, which should form part of the Constitutional Amendment Bill.

At an industry meet on GST, Jaitley had said the 1 per cent additional tax on inter-state sales was proposed as manufacturing states like Gujarat and Tamil Nadu were of the opinion that they, having spent money on putting up infrastructure, would lose on revenue as GST is more of a destination tax.

Referring to the stand-off on GST, Rangarajan, who is also a former chairman of the Prime Minister's Economic Advisory Council, said, "But on other issues, I think there should be some amount of flexibility, and we should also take note that whatever compromise is worked out is acceptable to the states also. The states may not like too rigid a formulation."

Asked if enough is being done to unearth black money, Rangarajan said that while one thing is to bring it back, the other is to prevent black money accumulation.

(Image credit: Economic Times)