IS POLITICS CREATING A HURDLE IN THE GST ROLL OUT??

“Consensus” is the only thing now which will take forward the process of the introduction of the Goods and Services Tax and that too is looking far away from the reach of the Government if we looks at the agenda of the upcoming meeting.

The upcoming meeting of the Empowered Committee of State Finance Ministers which is scheduled to take place in Goa on Oct. 30 will discuss the most quarrelsome issue of Constitutional Amendment. Constitutional Amendment Bill is required to give powers to states to levy Service Tax and the Centre to impose tax beyond the production stage. Currently , the Centre can impose tax on goods at the factory gate and services while states can impose tax at the retail level on goods. Meanwhile to put an end to this contentious issue, Gujarat Government came up with an alternative GST model. Gujarat has suggested that the states be allowed to collect both Central GST and States GST and then transfer the Centre’s share after deducting their compensation amount. But the Centre straightaway rejected that model on the grounds that it will challenge the basic structure of the Constitution, under which funds are to flow from the Union Government to the States.

Other areas that can occur as a hurdle in the building of the Consensuswould be Article 279A and Article 279B of the Constitutional Amendment Draft. Article 279A deals with the formation of a GST council, headed by the Union Finance Minister whereas Article 279B deals with the setting up of a Dispute Settlement Authority. The States are demanding that they should be individually allowed to make laws on the creation of such a body , instead of the Centre  setting it up through an amendment to the Constitution. The States are basically looking to protect their fiscal autonomy which they think will get affected in the new tax regime.A major source of substantial revenue for the States Government  are the Octroi and the entry tax. Their treatment in the new tax regime is still unclear and that too would be discussed in the upcoming meeting.

But according to our Finance Minister Mr. Pranab Mukherjee ,the Politics seems to be creating a hurdle in the rollout of the Goods and Services tax as the Government have already compromised a lot to accommodate the concerns of the States. Politics should not be mixed with the major economic decisions as it will ultimately affect the Growth of the Country.

Hence after looking to all these issues which are still unsolved , it seems that this upcoming meeting cannot provide the fruitful results which our Finance Ministry and the Mr. Asim Dasgupta is looking for and there will be no surprise if we hear about the next date of the meeting of the Empowered Committee of State Finance Ministers.