The divide among the states on the Goods and Services Tax (GST) came out in the open at the meeting of Empowered Committee of state finance ministers today, with some states favouring a phased approach for amending the Constitution, while some others states, mainly those ruled by the Congress, insisting on making all the amendments in one go.
In the phased approach, initially amendments will be made to the Constitution only for allowing the Centre and the states to share their tax base. The GST Council and the Dispute Settlement Authority will be kept outside the Constitution to begin with and could be given Constitutional backing at a later stage, if required.
“There are different views amongst us. In one approach, states are saying that with a little bit of further revision, we can go ahead. Alternatively, as an interim measure we can start with a basic constitutional amendment giving the states the power to levy GST,” Empowered Committee Chairman and West Bengal Finance Minister Asim Dasgupta said.
Dasgupta said the GST council with the Union finance minister as its chairman could be set up like a registered society, with the dispute settlement authority coming under this body. “If disputes are resolved you do not have to set up a dispute settlement body. We will meet the Union finance minister and discuss the proposals,” he added.
In a letter sent to the states on October 19, the Empowered Committee had suggested two alternative models for Constitutional amendment. The first model suggested setting up a GST council and dispute settlement authority under Article 279A and 279B, respectively. It proposed giving flexibility to the states in times of economic exigencies and natural calamities. The second option proposed omitting the two Articles from the Constitution.
Officials in the finance ministry, however, said it was not feasible to keep the Council out of the Constitution as it would lead to a situation similar to the Value Added Tax.
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Even as state finance ministers voiced different opinions on Constitutional Amendment approach, Dasgupta said there had been a positive attitude on the part of states towards a consensus on the further revision on GST-related Constitutional amendment.
Delhi Finance Minister A K Walia said Madhya Pradesh, Uttar Pradesh, Gujarat, Chhattisgarh and most BJP-ruled states were opposing a full-fledged Constitutional amendment. “We want to implement GST at the earliest. In the first approach, deviation (from GST rates) will be prevented,” he added.
Haryana Finance Minister Ajay Singh Yadav said it had become more of a political issue and needed to be resolved by senior leaders of all the parties. He said BJP-ruled states and Uttar Pradesh were opposing GST just for the sake of it.
“The Constitutional amendments that were proposed today would dilute GST beyond a point which defeats the very purpose of reforms. The second alternative of deleting Article 279A and 279B is not at all acceptable,” said Maharashtra Finance Minister Sunil Tatkare.
Madhya Pradesh Finance Minister Raghavji said Constitutional amendment was not required for GST and all the Centre and the states needed to do was to remove the cascading effect. He said first there had be to a structure for GST, but until now there was no consensus on many things like threshold, purchase tax and rates.
In a written speech, Gujarat Finance Minister Saurabh Patel also echoed similar views and said, “It would not be useful to dwell at this stage upon a Constitutional amendment unless the issues of autonomy and fiscal flexibility of states are fully addressed.”
“Dropping of GST Council and a common dispute resolution settlement body should mean eliminating the two important pillars of unified and harmonious GST system. The purpose of the dispute settlement body is to impart enforceability to the decisions of the council,” said Prashant Deshpande, leader (indirect tax), Deloitte India.