States GST panel meet today to elect chairman

The post of chairman fell vacant as Abdul Rahim Rather, former FM of J&K lost his assembly seat in the state

As the Centre hopes to roll out the goods and services tax (GST) from April 2016-17, the empowered committee of state finance ministers will meet on Friday to elect its chairman.

The post of chairman is pivotal because the Centre will have to depend on this person to bring the states on board and get the constitution amendment bill on GST and further GST bills cleared. 

Various names such as that of Gujarat Finance Minister Saurabh Patel, West Bengal Finance Minister Amit Mitra, Punjab Finance Minister Parminder Singh Dhindsa and Kerala Finance Minister K M Mani are doing the rounds. Sources said there is no front-runner as of now and state finance ministers would elect the chairma.
 

Sources particularly focused on the point that FMs would "elect" and not "select" the chairman.

The post of chairman fell vacant as Abdul Rahim Rather, former finance minister of Jammu & Kashmir (J&K), lost the Assembly elections from the Charar-e-Sharief constituency, ending his 37-year stint in the J&K legislature.

The committee was set up by the Atal Bihari-led National Democratic Alliance (NDA) government in 2000. It was mandated with facilitating the states to switch from sales tax to value-added tax (VAT) regime. On April 1, 2005, state-level VAT replaced sales tax in a number of states; some, such as Uttar Pradesh and Tamil Nadu, joined later. Subsequently, the committee was mandated with facilitating states to switch to GST, in consultation with the Centre.

Former West Bengal finance minister and Communist Party of India (Marxist) leader Asim Dasgupta was the committee's chairman since its inception till 2011. He was followed by Bharatiya Janata Party's Sushil Kumar Modi and, subsequently, Rather.

Under Rather's chairmanship, Union Finance Minister Arun Jaitley was able to broker an agreement with the states on GST, before tabling a constitutional amendment Bill in this regard in Parliament. However, some states such as West Bengal did point out that they were not consulted on changes in the bill.

Except for Rather, the two earlier chairmen were from the opposition-ruled states. Modi was selected when Pranab Mukherjee was the Union finance minister during the UPA regime.

Rather broke this tradition as he is from the National Conference, an ally of the UPA. He was appointed when P Chidambaram was the finance minister in the UPA II.

The role of the chairman of the GST panel assumes importance since the constitutional amendment Bill on the new indirect tax, pending in the Lok Sabha, requires assent of at least half of the total states -15 - to make it a law. Also, GST can be introduced across India, when every state assembly, along with Parliament, passes their respective GST bills.

There were major differences between the states and the Centre over inclusion of petroleum in GST. Ultimately, it was included in GST, but the Centre was allowed to impose excise duty and the states VAT till the proposed GST council decides on the issue.

Meanwhile, the Centre has made situation amenable for states to embrace GST by getting Cabinet clearance for the release of Rs 33,000 crore in tranches to states and Union Territories to compensate them for revenue loss on account of cut in Central Sales Tax (CST) for three financial years up to 2012-13. In the first phase, Rs 10,800 crore is payable for 2010-11, sources said.

A total amount of Rs 33,000 crore is proposed to be released in 2014-15 and the subsequent two financial years. CST, a tax on inter-state movement of goods, was cut from four per cent to two per cent in phases after states embraced value added tax from April 1. However, there was a dispute between states and the Centre over the amount of compensation, where the former wanted the latter to build trust with them on this account to enable them to support GST.