New Delhi: Union Minister Arun Jaitley on Sunday attacked Congress President Rahul Gandhi's idea of a single slab GST for India, terming it flawed.
He added while there would be scope to merge some of the mid-category tax slabs depending on the collections going up, but a single-slab system will not work for India.
"Rahul Gandhi has been advocating a single slab GST for India. It is a flawed idea. A single slab GST can function only in those countries where the entire population has a similar and a higher level of paying capacity," Jaitley wrote in a Facebook post on completion of one year of the Goods and Services Tax (GST).
"Being fascinated by the Singapore model is understandable but the population profile of a state like Singapore and India is very different," he said adding that while Singapore can charge 7 per cent GST on food and on luxury goods, that model won't work here.
"Since GST is a regressive tax, the poor have to be given a substantial relief. Thus most food items - agricultural products and the aam aadmi (common man) used products have to be tax exempt. Some others have to be taxed at a nominal rate. The others could be taxed higher.
"Eventually, as the collections improve, many more items from the 28 per cent category can possibly come down. Only sin products and luxury goods can remain there," he said.
Jaitley also slammed Gandhi and former Finance Minister P. Chidambaram on their demand to bring petroleum products under GST, saying the Congress Finance Ministers in the states were not ready for it.
He said it was the current government which worked out a formula to ensure that "petroleum products would be included in the Constitution amendment providing for the GST but the council can decide the date from which to bring them into GST".
"The UPA kept petroleum products permanently outside GST. On the contrary, we brought them back into the Constitution as levyable to GST and can gradually impose the GST when the GST Council so decides.
"For this I would continue to make my earnest efforts and hopefully when the states are more comfortable with the revenue position, it would be an ideal time to strike for a consensus between them," he said.
Jaitley, who is listed as a minister without portfolio in the Prime Minister's website, also attacked the Congress-led UPA Government for "losing the confidence of the states" when the previous government tried to implement GST.
"In a move towards the single tax system, the UPA asked the states to abolish the Central Sales Tax (CST). It promised the states that it would give them a compensation in lieu of the CST for a certain number of years.
"The states acted accordingly, abolished the CST and the Central government owed the states several thousand crores as CST compensation. When the states demanded CST compensation, the Centre would look the other way," he said.
Jaitley added that when he took over as the Finance Minister, he cleared all the arrears of CST in order to bridge the trust as the states had declared that they would discuss GST only if past CST compensation is paid.
"The CST compensation was paid. The states were then willing to come to the table and move further on the GST," he said.
Jaitley also said after he took over, he agreed to pay to the states, after discussing in the GST Council, a 14 per cent increase of revenue for the first five years for any loss of revenue and the states jumped for this proposal.