If you want to build consensus, you have to go by what states say: Abdul Rahim Rather

Interview with Chairman, Empowered committee of state finance ministers

The Centre was keenly watching the two-day meeting of the empowered  committee of state  finance ministers on goods and services tax (GST) at Shillong, as its hopes of tabling the Constitution Amendment Bill in Parliament hinged on the meet’s outcome. The meeting has poured cold water on the government’s hopes. States did not agree on the Centre's proposal to keep alcohol and  petroleum products within GST, albeit out  of  the Bill. Committee chairman Abdul Rahim Rather tells Vrishti  Beniwal that the states have given their unanimous recommendations  and it is  up to the Centre to take a call on them. Edited excerpts:

States have unanimously agreed to oppose some provisions of the draft Constitutional Amendment Bill. But the Centre is not likely to agree with many of your recommendations. Does it mean there  is a stand-off now between  the Centre and states?

There was a consensus among all the states. We cannot say that the Centre won’t agree. Let’s see what decision they (the Centre) will take on it.

The argument against the states’ demand to keep petroleum, alcohol and entry tax out of GST is that it is against the principles of economics and defeats the purpose of a uniform tax system. Does it hold water?

That is true, but you can’t help it. Irrespective of political affiliations, states were unanimous on these issues. If you want to build a consensus, you have to go by what states say. The Centre had said states could levy Value Added Tax over and above GST on petroleum products, but states did not agree, as it could lead to multiple taxation.

Don’t you agree that it would be a flawed model if so many exclusions are there?

Yes. But we can think on those issues later.This is not an end of the business. If there is a problem, the decision can be reviewed in the due course of time.

But, if you constitutionally debar something, it would be difficult to change it in future. Why not to keep such exclusions out of the Bill at the moment and let the GST Council take a call on it later?

That is the decision of the empowered committee and you have to take the states on board on this. Even now, the Constitution Amendment Bill needs a two-third majority in Parliament and that would be the case in future too if you want to change anything.   

In  Bhubaneswar meeting, the states had agreed to keep petroleum within the GST regime. Then, why this change of mind?

There were dissenting voices there as well. But, finally, the states agreed on the condition that if that was kept out of Constitution, the Centre would make a firm commitment that it would not bring it within GST at least for sometime till the new system stabilises.

On entry tax, the standing committee on finance has suggested that it should be subsumed in GST. Why are the states opposed to it?

Yes. Ideally it should be within GST, but you have to respect views of the states.  

Is opposition to GST more because of political reasons than economics? Some states are to polls. There are general elections next year. Some states have expressed concerns that this won’t be the right time to go ahead with GST.

I don’t think there is any politics involved in our opposition. We have not stopped our work. Everybody is in favour of GST, but we have given our recommendations on some issues, which are of concern to the states.

Given the limited time to table the Bill in the Winter Session of Parliament, do you think the next government would now take a call on GST?

I don’t know what they will do. We have done our job and sent our recommendations. Let the Union government take a call and find an appropriate time to present this revised draft before Parliament.

Why do you want to keep petroleum and alcohol outside GST? Is it because of loss of revenue or taxation rights?

It is because of revenue loss. That was the concern shown by the states.