The Centre and states were yet again unable to stitch a deal on the constitutional amendments, clouding prospects for rollout of India’s most ambitious indirect taxes reform — goods and services tax — next year. The Union finance minister Pranab Mukherjee, however, promised another draft to address concern raised by the states ruled by leading opposition party BJP and Tamil Nadu where Congress’ key ally DMK is in power.
“..Some states sought more time, about a month or so and union finance minister has agreed,” said Asim Dasgupta, West Bengal finance minister and chairman of state finance ministers, after the meeting of the empowered committee of state finance minsiters on Wednesday.
However, he said the panel had left the decision to introduce the bill in the monsoon session on union finance minister.
The Centre may still attempt to use this small window offered by the panel to introduce the constitutional amendment bill in the monsoon session and accomodate the changes suggested by states, but it may be a tough call with both a key ally and BJP’s opposing the draft bill.
Tamil Nadu, Uttar Pradesh and the BJP-ruled states including Madhya Pradesh, Gujarat, Uttarakhand, Karnataka, Chhattisgarh refused to go along with the new draft of constitutional amendments even after extracting several concessions from the Centre.
“I have been wondering the reason for the rush to implement the GST as if the country is passing through a severe financial crisis and GST is the panacea for all the ills,” said Madhya Pradesh finance minister Raghavji.
He said states had barely got two working days to examine the revised draft and take a decision on it.
The centre revised the original bill after most states cutting across political party lines objected to it arguing that it compromised their fiscal autonomy.
Even the modified proposal that dropped the special veto for union finance minister in the proposed Joint GST Council has failed to assuage the states, particularly the BJP ruled ones.
The centre has bent backwards to ensure timely implementation of GST, already delayed by an year, and yeilded on most of the issues including a dual-rate structure for the tax.
The GST requires an amendment to the constitution to allow Parliament and state assemblies to impose tax on same items, which is not the case now. At present, the Centre can impose tax on goods at the factory gate and services and states on goods at retail level. States also do not have the power to levy tax on services.
Mr Mukherjee told the empowered panel that the primacy of the Legislature in the area of taxation is supreme and inalienable and that the proposed draft on GST did not seek to disturb or alter this in any manner.
On states’ concerns over GST council impinging upon their fiscal autonomy, he said,: “The decisions of the GST Council would be merely ‘recommendations’ to the Union and the states”.
The collective wisdom of the Council would be a valuable resource in benchmarking rates, exemptions, thresholds and other key parameters for both the Centre and the States, Mr Mukherjee said.
GST will replace all central and state indirect taxes on goods and services with a single levy, helping create a seamless pan-Indian market for goods and services.
