 "T M Thomas ISSAC")
T M THOMAS ISAAC, finance minister of Kerala, speaks on the current sticking point regarding the proposed national Goods and Services Tax (GST). Edited excerpts of a talk with T E Narasimhan & Gireesh Babu:
The GST Council meeting on Saturday was inconclusive.
We were to consider the draft laws. There was also unfinished business about the division of administrative powers on collection of the tax. The state's (Kerala’s) position has always been that smaller traders and also service providers should be within the ambit of the state administration. States being nearer to the grassroots, it was best that states be exercising the administration over small dealers and service providers. The Centre had initially agreed to this for goods but not for services. This was an issue of dispute between Centre and states. The central government wants a vertical split; we are demanding a horizontal split to start with and then a vertical split, with cross-empowerment (over) dealers and service providers above Rs 1.5 crore (annual turnover).
There were arguments that this should be taken up first for a decision before taking up the law, in the agenda. Later, when the issue of vertical and horizontal split of the administrative powers was taken up once again, the Centre and states stuck to their positions and there was no consensus. So, the meeting adjourned without a decision on it and I think we will meet again on December 11 and 12, to discuss the same issues.
How many states are for the vertical split, under which states will have powers on small traders and service providers below Rs 1.5 crore?
We don’t take exact numbers but a decision in the GST Council would require 75% of the votes, which means beside the Centre, around 20 States would have to support the motion; that was not the case. I think 15-16 states expressed their view in favour of a division of powers.
What is the chance of a consensus in the next meeting?
So far, even states like Kerala, which has also got political and ideological differences with GST as such, have been accommodative so that a consensus can be arrived upon on many issues. I think the Centre was also, to an extent, accommodative. But, states have been agreeing to the modification the Centre was suggesting. Now, here is a practical issue, with no political or administrative implications as such but which means a lot to the states — we are being stripped of full taxation powers.
We’d like to keep a significant part of the administrative power. The Centre should be more sensitive to the sentiments of states and accommodate our demand; states are unwilling to concede (on this). The ball is in the Centre's court. If it take a more accommodative attitude, there can be a consensus.
You were mentioning that with this, GST might not be implemented by April next year.
With all the delay, even if we reach an agreement in the next meeting, I don’t know whether it would be possible to push it through the Parliament agenda. The understanding was that it should be concluded in the current meeting. Therefore, it looks like it might not be rolled out in April 1. We might have to look at September, midway through 2017-18.
You said many other larger issues were earlier resolved by consensus but this is now becoming a deadlock. Is the sharing of administrative powers the largest issue in GST implementation?
Outsiders might assume so and ask why we are fighting over this. Look at this from the states’ standpoint. They’ve lost all their taxation powers. The Centre continues to exercise various taxes and cesses and alternatives to tax like public borrowing, sale of assets, etc. States feel they lost the power and if it (GST structure) is going to be an autonomous administration, then it is not acceptable.
Would there be voting if no consensus is arrived at in the next meeting?
It requires over 75 % of votes for a decision to be made and there are no sufficient votes for that decision or to counter it. So, it is a stalemate. The question now is how committed the centre is for implementing this reform at the earliest. If they are, they would make a concession to the demand of the states.
Was demonetisation one of the discussion points?
Demonetisation and the (associated) controversies are in the atmosphere across the country as a whole. It has set the opposition and the ruling party on a confrontation position. This might have influenced (the atmosphere at the GST Council meet). For me, independent of what might have happened on demonetisation, this was an issue on which Kerala has, right from the beginning, been taking a consistent position.
