Finance Minister Arun Jaitley on Friday promised not to spring any surprises in fixing tax rates under the new GST regime but asked India Inc to pass on benefit of reduced taxes to consumers and not profiteer.
He also sounded a note of caution on growing tendency of protectionism in nations around the world, saying the jury is still out if such moves would make the global economy more efficient or sluggish.
Comments by Jaitley at CII annual conference came against the backdrop of fears of global trade and investment being impacted by increasing protectionism in nations like the US, which has tightened visa regime and is insisting on using American products.
To the domestic industry, Jaitley asked them to pass on to consumers the benefit of reduction in taxes under Goods and Services Tax (GST) which will eliminate the current compounding effect of different central and state levies.
The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagaron May 18-19 to finalise tax rates on different goods and services after unifying at least 10 indirect taxes into the GST.
He said rules and regulations governing GST have been framed and fixing of tariffs for different commodities is in "final stages."
"The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise, it's not going to be very significantly different (from present)," he said.
The GST Council has finalised four rate categories of five per cent, 12 per cent, 18 per cent and 28 per cent after unifying levies like central excise, service tax and VAT.
Fitment will be done by adding the total incidence of current taxation (central plus state levies) and then putting the goods or services in the tax bracket closest to it.
The Finance Minister said the Council is of the opinion that any benefit accruing from lower tax rates under GST should be passed on to consumers.
"Profit is not a bad word ... But unfair enrichment is. And therefore, the benefit of reduction in taxation is a benefit that consumers are entitled to. And that's not a principle that can be seriously contested," he said.
The GST laws approved by Parliament have incorporated an anti-profiteering provision to ensure that the reduction of tax incidence is passed on to consumers.
On protectionism, he took comfort in such voices not being heard in India.
A contrarian trend, he said, was being witnessed in developed economies that is "a little worry".
"In the US, a question has already arisen that whether US corporations would be compelled to buy products, which are costlier. Whether they would be compelled to hire professionals or engage services which are relatively costlier.
"What would then be the plight of the economy? Will it be more efficient or will it be more sluggish? I am sure that this debate will continue in each of the countries where debate on protectionism has begun," he said.
Referring to the developments in the United Kingdom, he said the British leadership is insisting that Brexit should not be construed as any form of protectionism and instead they want to engage more with European Union as well as India.
India, he said, over the last few years has shown a greater ability to reform and undertook courageous and structural reform.
"We have benefited both from domestic liberalisation and also where we integrated ourselves. Our ability to provide services is certainly unquestioned, it is certainly better than most other economies. Can we improve our ability on manufacturing, that is where we have a lot of distance to cover," he said.