Economists said that the GST would be slightly inflationary in the first year. (Reuters)

Former Finance Minister P. Chidambaram on Monday said that too many GST (Goods and Services tax) rates would be ‘disastrous’ and advocated for reduction of rates in the new indirect tax regime.

“A well designed GST is expected to have a standard rate, plus and minus standard rate. That latitude is interpreted to me that we will have multiple rates – zero to 100 – that’s not GST. That is simply existing VAT rates in a new shape…,” he said.

“We sincerely hope that we do not misinterpret the design of standard, standard minus and plus rate. We can have 20 rates… it will be fooling the country,” Chidambaram said at a session organised by IIM Calcutta in association with Observer Research Foundation on economic reforms.

He said “Better counsel will prevail and they will be able to reduce the number of rates to three or so”.

Economists said that the GST would be slightly inflationary in the first year. The rate of service tax is 12-14 per cent. Whatever the standard rate be, it will raise the service tax rate, he said.

“Unless, it be compensated by lower rate goods, it will be inflationary,” he added.