If one litre of milk costs Rs 20 and 10 per cent tax is levied on it, a person has to pay Rs 2 extra i.e. the total sum becomes Rs 22. Similarly, if one luxury car costs Rs 20,00,000, and 10 per cent tax is levied on it, then the total sum will become Rs 22,00,000. In the first case, a customer has to pay Rs 2 extra as tax, while in the second case a customer has to pay Rs 2,00000 extra. This is a simple calculation, but PM Narendra Modi doesn’t seem to understand this point.
In an interview, Modi on Tuesday ruled out a single tax rate under the GST, saying Mercedes car and milk cannot be taxed at the same rate adding that accepting Congress party’ demand for a uniform 18 per cent rate would lead to a spike in food and essential items’ taxation.
Currently, no GST is imposed on milk and luxury cars fall under 25 per cent GST tax slab. However, if both the things were kept at the same tax slab, and the same per cent of tax was imposed, the total sum will not change in a similar fashion as explained in the example given above.
The fact that the prime minister has decided to compare milk and Mercedes cars prices is bizarre as the former is exempted from the GST. However, the more worrying factor is that Modi seems to have caused a huge embarrassment by getting the Math wrong.
Interestingly, outgoing Chief Economic Advisor Arvind Subramanian echoed Congress vice-president Rahul Gandhi’s demand of removing the highest tax slab of 28 per cent in GST. He had stated that a uniform rate of cess should be applied for simplification of GST. However, Modi is justifying his act of not willing to accept the suggestions of the CEC and opposition by underlining illogical examples.