Kochi: Kerala finance minister Thomas Isaac is in favour of a goods and services tax (GST) above 20% and a rate of 5% on articles of daily consumption to minimize the burden on the common man.

This puts Kerala, along with some other states who argue on similar lines, on a collision course with the Union government which favours a moderate GST rate to contain inflationary pressures. The Congress, the other major national party, is insisting that the tax rate be capped at 18% in the GST legislation.

Isaac, in an interview, claimed the standard rate under GST will be above 18%.

“I am certain it (the standard rate) is going to be above 18%. I do not think anybody will settle below 18%. I am arguing for a fair rate. Compromises will have to be made. The standard rate should be above 20% for sure. But still there would be significant reduction in incidence of tax," he said.

He also favoured a lower rate of 5% to protect the common man as against a 10-12% lower rate proposed by chief economic adviser (CEA) Arvind Subramanian in his report.

“Unlike Arvind Subramanian, who argues for 10-12% lower rate, I will say go further down to 5% for consumers’ necessities of life. That way you protect the poor," he said.

He advocated looking at the incidence of the present tax burden to bring it down.

“I will look at what’s the incidence of tax burden today and settle for a tax burden which is lower than that. On the manufacture of consumer products, the incidence of tax is 30-32%."

Isaac also dismissed concerns regarding inflation if the rates go beyond 18%, calling such arguments “stupid and foolish".

“There’s no science in saying it... If they are so upset about inflation they should reduce the excise duty on petrol and diesel, which is the main reason for inflation in this country," he said.

Most states rejected the recommendations of the Subramanian committee, saying that the 16.9% to 18.9% standard rate proposed by it was too low, Mint reported on 26 July.

They had instead sought common ground between the 23-25% rates proposed by the National Institute of Public Finance and Policy and CEA’s report.

Isaac said Kerala will look to ratify the constitution amendment bill in 1-2 months.

He also favoured an anti-profiteering clause to ensure that the benefits of GST are passed on to the common man in the form of lower prices.

“Anti-profiteering clause should be part of the GST law. The benefits of GST should be transferred to the customer. So far, the empowered committee has only talked about it in general terms."

Isaac also doesn’t want the Kerala government’s so-called fat tax—a tax levied on fast food—to be subsumed under GST. “I will also argue for special cases like fat tax. SGST (state GST) is not shared with anybody else. Why should anybody be upset with it?" he said.

S.D. Majumder, former chairman of the Central Board of Excise and Customs, said the GST Council will take a decision on the rates. “There may be differing opinions but the GST council will take a decision on the rates by a three-fourths majority. I think the standard rate may come to around 20%."

Remya Nair in New Delhi contributed to this story.

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