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Milk and Mercedes cannot be taxed at same rate. But Why?

PM Modi was not mincing his words when he slammed Congress with the statement that  Milk and Mercedes cannot be taxed at the same rate. While he is right since the present GST on milk is zero (HSN code 0401) while that on Mercedes is 28% with an additional 23% cess.

Is this comparison a no brainer? The answer is yes if you believe that its government’s job to tax the rich and redistribute the wealth. However in practice this has never happened.

Lets put it this way – an entry level luxury car that starts at around twenty five lakh rupees should have had costed not more than fourteen but for the government taxes. This would have meant that most of the Indians who drive cars like Verna or City would have been driving better cars, safer cars. If we were to just calculate the loss to GDP by the unfortunate losses due to the car accidents, PM’s claim does not cover the losses his policy is causing.

The again by putting no taxation on milk a huge taxation base is left untapped.  Branded wheat is taxed at 5%, so is banded Rice. So an Ashirwad and Agro Fresh are being taxed but the Amul or Mother Dairy are not.

The matter of fact is that we have Taxation policy much like the flow of water – following path of least resistance. We tax things in higher slabs because we can, and lower tax slabs because there is a democratic resistance against it.  Dear Prime Minister, why cant we have a grown up discussion on the tax structure in the country. You promised us One Country One Tax what we have One country Four Tax Slabs and multiple Cess structures.




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