Dr. Sanjiv Agarwal, FCA, FCS
The Constitutional (122nd Amendment) Bill, 2014 which is now pending in Rajya Sabha for passage faces challenge from main opposition party, Indian National Congress. It mainly wants the GST rate capped at 18 percent in the Amendment itself, removal of additional one percent tax for the manufacturing states (Gujarat, Maharashtra etc) and an independent dispute redressal mechanism.
In the present dispensation, the rate of GST shall be dealt with by the Empowered Committee which has representation of all the states and union Government. The additional tax of one percent has been agreed to by Empowered Committee with consensus of all states and GST Council shall deal with the dispute resolutions.
The GST Constitutional Amendment Bill is likely to be taken up in the Rajya Sabha this week but it may not be that easy. While the Business Advisory Committee of Rajya Sabha has allotted just four hours for discussion on GST Bill, it seems that if sensible discussions take place, this time may not be enough. However, if it gets passed (hopefully so) in the wake of disturbance by opposition, it may be yet another example of paralysis of political accountability. We have witnessed the Budgets being passed like that in the past.
The main opposition (congress) demands do not sound logical as the Bill was first moved by Congress only in 2011. Never before these issues have crept in and these are unwarranted too as the Empowered Committee of State Finance Ministers has approved of these proposals after due deliberations and considering all pros and cons. Congress can not sit over or overrule the collective wisdom of Empowered Committee as well as recommendations of the Standing Committee on the Bill without any strong logic. Congress knows that by raising a voice now on 18 percent cap may earn them some score but it may be a waste of effort. When congress was in power, the FM himself used to talk of a revenue neutral rate of over 20 percent.
Further, in none of the taxation laws in our country, the cap for tax rate is in the Constitution. It is either in the specific legislation or is varied by way of annual budgets or by way of notifications. Same should happen in case of GST depending upon the socio-economic considerations. If the rate is fixed in the Constitutional provisions itself, any change therein will be very difficult as it will require approval of both Houses with two-third majority followed by ratification by atleast half of the State Assemblies. This may take place only over a period of one year or so. Moreover, there was no such proposal when Congress was in power. Such an argument and demand is baseless and devoid of any economic reasoning. Yes, roll-back of additional one percent tax for manufacturing states can be considered for two reasons – one it is against the GST system itself and two, it would lead to discrimination within the states. Some states are rich in mines and minerals while others in agriculture. Law of averages will eventually settle this ground too.
Dispute redressed by GST Council is also a very thought after proposal and even former Finance Minister had advocated for the same. Now a U-turn on the same is not desirable.
What is required today is the clearing of mental blockage in the opposition which is in larger public interest and country’s welfare. Everyone knows that GST Bill was moved by Congress earlier and any ridiculous barriers created by them will only tarnish their image and country will never forgive them and their present leadership for the same.