GST in trouble, Haryana & AP join opposition camp
5 Aug 2010,
The government’s efforts to roll out from next fiscal the ambitious indirect tax reform, the goods and services tax (GST), has run into
serious difficulty with many states refusing to back the constitutional amendments proposed by the Centre to facilitate the new tax.
The Opposition from the states came even as finance minister Pranab Mukherjee made an emotional appeal to all political parties to support the GST, which has already been pushed back by a year.
“The draft constitutional amendment in its present form is not acceptable to states,” Asim Dasgupta, West Bengal finance minister and chairman, empowered committee of state finance ministers told reporters but added that states were not opposed to the GST per se.
A number of states, cutting across political party lines, and including some key ones such as Madhya Pradesh, Gujarat, Haryana, Andhra Pradesh, Tamil Nadu and Kerala have refused to endorse the constitutional amendments arguing that they impinged on fiscal autonomy of states.
“This would be an untenable constitutional arrangement, violative of the basic federal structure of the constitution, usurping the sovereignty and fiscal autonomy of the state,” said K Anbazhagan, FM, Tamil Nadu.
States’ unwillingness to support Centre’s proposal will make it difficult for the government to introduce the constitution amendment bill in the monsoon session of Parliament, which concludes on August 25.
The bill has to be passed by a two-third majority in the Parliament and also has to be ratified by at least 15 state assemblies, which makes a political consensus necessary.
If the Centre were to bring a bill in the winter session, after building a consensus, which would require significant concession to states, there would not be enough time left to ensure implementation from April 1, 2011.
Finance minister Pranab Mukherjee sought political support for the tax in his reply to the debate on price rise in the Parliament. “Implementation of GST depends on the co-operation and support of all political parties as constitutional amendments have to be made. I do hope all the political parties who have expressed grave concern on the price rise and plight of ‘Aam Aadmi’ will convert this concern into real action by whole heartedly supporting GST,” he said.
The states understand the need for the constitutional changes, but the proposed joint council of all state finance ministers with union finance minister as its chairman to resolve GST related issue has the states worried as it gives the latter power to veto any proposal for a change in the structure or rate of GST.
“Veto power to union finance minister is not acceptable to states,” said Haryana finance minister Ajay Singh Yadav. Interestingly, Haryana has a congress government.
Mr Dasgupta’s suggestion of limiting Centre’s veto to central GST also did not cut ice with states.
Prashant Deshpande, leader indirect taxes, Deloitte
“Given that two-third majority will reflect the collective wisdom of the States, issue of veto power with the Union Finance Minister need not be pressed if it acts as a hurdle.”
There is a broad agreement on most of the other issues including the three-rate structure proposed by the centre — goods will attract a levy of 20%, services 16% and essential items a concessional 12%.
