Opposing states seek more time to study the revised draft Bill.
States ruled by the Bharatiya Janata Party (BJP) as well as Uttar Pradesh and Tamil Nadu, which are ruled by non-Congress parties, today put fresh hurdles in the Centre’s plan for a nationwide rollout of the Goods and Services Tax (GST) regime from April 1 next year.
Union Finance Minister Pranab Mukherjee, who met state finance ministers today in a bid to generate consensus for the introduction of a Constitutional Amendment Bill in the ongoing monsoon session of Parliament, could not convince all states to agree to the diluted proposals. On their part, the opposing states sought another month to go through the revised draft Bill.
During a meeting that lasted till late in the evening, Mukherjee assured the states that the empowered committee of state finance ministers could revert with its views in a month. Meanwhile, if he tabled the Bill during the current session of Parliament, the suggestions from the states will be forwarded to the Parliamentary standing committee.
Though indications are that Mukherjee will set the ball rolling by introducing a Bill, a final decision will be taken in the next few days, once he consulted other UPA allies.
“While some states sought more time, about a month or so, others said they are prepared,” Empowered Group of State Finance Ministers’ Chairman Asim Dasgupta told reporters after their meeting today. Dasgupta, who is also the finance minister of West Bengal, reiterated that there would not be any change in the April 2011 deadline for GST rollout and it was for the Centre to decide when the Bill would be introduced.
“The introduction of the Constitutional Amendment Bill in the monsoon session is critically important to meet the April 2011 deadline and the proposed third revision in the draft Bill to take care of concerns relating to inclusion of various taxes levied and collected by local bodies presents further challenges to meet that deadline,” said Prashant Deshpande, leader, indirect tax, Deloitte.
During his meeting with state finance ministers, Mukherjee stressed the urgency of bringing to culmination an effort which started four years ago. He said the Constitutional Amendment Bill was only an enabling provision and did not prohibit the government from continuing dialogue on rates, exemptions and other issues related to GST. “Both the activities can go on parallely. The wisdom lies in moving ahead with the Constitutional Amendment without any further delay, as a preparatory step for the introduction of GST,” he added.
The opposition from the states came as a surprise for the finance ministry, which had dropped all contentious proposals, including the veto power to the finance minister, in order to get the approval of all states on the draft Bill. If the Bill is not introduced in the monsoon session, the government will find it difficult to meet the April 2011 deadline. It has already missed the original deadline of April 2010.
Congress-ruled states and Left parties, which broadly supported the proposals of the revised draft, accused the BJP of making it a political issue. Along with the BJP, the Bahujan Samaj Party and Dravida Munnetra Kazhagam, which rule Uttar Pradesh and Tamil Nadu, respectively, also opposed a “hurried exercise” on amending the Constitution.
Kerala Finance Minister Thomas Isaac said BJP-ruled states did not want the Constitution Amendment Bill to be passed now. Maharashtra Finance Minister Sunil Tatkare also said the proposed amendments had ensured fiscal autonomy to the states.
“The states have got hardly two working days to examine the revised draft… 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.
The Union finance minister tried to allay states’ fears and said primacy of the legislature in taxation was supreme and inalienable and the proposed draft on GST did not seek to disturb or alter this in any manner.
“It seems your deepest concern has been the perceived sacrifice of fiscal autonomy, owing to two provisions in this draft — one, the role of the GST Council and two, the so-called ‘veto’ power… It was perception of some of you that the proposal has the effect of granting primacy to the Council over the Legislature. I would emphasise in a Parliamentary democracy this can never be the case,” he said.
Regarding states’ concerns about the subsumation of entry tax and entertainment tax levied and collected by local bodies, he assured the Joint Working Group set up to draft the Constitutional Amendments would take care of these issues while preparing the third revised draft.
