Thomas Isaac, the 65 years old finance minister of Kerala has called Paint, TV, Refrigerators luxury goods in a series of tweets after the GST council decided to move these goods from the 28 percent tax bracket to 18 percent bracket. Thomas Isaac has obtained a Ph.D. from the Centre for Development Studies, which is academically affiliated to Jawaharlal Nehru University, so such statements from him are laughable if anything. It is important to understand that the 28 percent tax bracket is especially for ‘sin goods’. The middle class was in the focus of the council as the goods and services consumed by the country’s burgeoning middle class were put in lower tax slab. The consumer electronic items like Refrigerators, freezers and other refrigerating or freezing equipment including a water cooler, washing machines, television, and electric soothing irons were moved from 28 percent tax slab to 18 percent tax slab. The tax rate on paint and varnishes, putty, resin cement was also rationalized at 18 percent tax rate.
Question is raised why reduction in tax on luxuries was not opposed. I did not attend because I am undergoing treatment. We had discussed and clarified position of the state on issues included in the agenda note. But this particular item was circulated in the afternoon.
— Thomas Isaac (@drthomasisaac) July 21, 2018
It is not that I am opposing tax reduction. But the important question is on whose consumption commodities, those of the rich or those of the poor are you reducing the taxes? GST has proved to be a bonanza to the rich of India.
— Thomas Isaac (@drthomasisaac) July 21, 2018
If anyone considered GST revenue buoyant enough to argue for a reduction in rates they should have reduced rates of the necessities. May be even made them tax free. But reducing the taxes for durables from GST 30-40 percent to 18 percent only betrays class bias of proponents.
— Thomas Isaac (@drthomasisaac) July 21, 2018
The middle class population of India is somewhere between 200-400 million—which, at the upper bound, is the size of the population of the US. Being the finance minister of a relatively rich state like Kerala, he should have supported the rationalization of GST rates for consumer goods. But being habitual to oppose any decision from the Modi government he chooses to go against the lowering of taxes too. According to the Broadcast India 2018 Survey conducted by Broadcast Audience Research Council (BARC) India and released last week, 197 million of the 298 million homes in India today own a TV. If two out of three Indians own a television, then clearly it is not a luxury good. Haseeb Drabu, the former finance minister of Jammu and Kashmir, during a meeting of the GST Council in November last year said “We should evolve modern tax categories that reflect contemporary consumption trends.”
The consumption trends in the country changed fairly in the country in the post-liberalization era. The TV, Refrigerator, Paint etc are now consumed by people of the middle class so calling them sin goods or keeping them in a sin goods tax bracket which is meant for Alcohol, Paintings is treachery with the ‘common’ people of India. The rationalization of taxes is actually something the GST Council should have done much earlier, having gathered the conviction that a well-modeled GST which reflected contemporary consumer reality made more sense than an outdated structure inherited from a pre-1980 era. One more thing is that higher tax leads to lower consumption of products, so more taxes on products like AC, the TV will lead to lower consumption. If the tax is low on these products then people will purchase more and the revenue loss due lowering of tax rates could be recovered from growing sales.
The opportunist seductive rhetoric of rich versus poor narrative by communists can lead to missing the wood for the trees. Recently the Chief Minister of Kerala, Pinarayi Vijayan decided to go to the United States for health treatment. There is nothing wrong with getting a health treatment in the United States by CM of a state but at the same time talking about equality for everyone wrong. But the fact is that every person in Kerala could not afford a medical treatment in the United States. So the communist leaders like Thomas Isaac need to respect the middle class of India, otherwise, they will be wiped out from the last bastion of communism in next elections.