Putting a cap on GST rate a difficult proposition, says Arun Jaitley

Finance minister Arun Jaitley today said that it would be difficult to accept the opposition Congress party's demand to incorporate a clause to cap the goods and services tax (GST) rate in the constitution amendment bill that is still stuck in Parliament.

Earlier, answering queries at the Hindustan Times Leadership Summit on 4 December last year, Jaitley had pointed out that fixing an 18 per cent cap on the goods and services tax (GST) rate as suggested by the Congress would lead to a situation where the government would be unable to raise taxes on a host of "sin" products and luxury goods.

"There are sin products (alcohol, cigarettes) that need to be taxed high. There are polluting products and there are luxury items that should attract higher taxes," he said answering queries at the summit.

The proposed uniform sales tax, India's biggest tax reform since independence in 1947, seeks to replace a slew of federal and state levies, transforming the nation of 1.2 billion people into a customs union.

The Congress party, the original author of the tax reform, has opposed the bill, calling it "flawed". It wants Jaitley to cap the rate of GST at less than 20 per cent.

The GST bill was passed in the Lok Sabha in May, but has been held up in the Rajya Sabha, where the ruling Bharatiya Janata Party-led NDA does not have a majority.