Spat On GST...

Govt pitching for September implementation of GST

 As the delay in rolling out the nationwide goods and services tax (GST) seems inevitable, the government is now targeting its implementation by July. Earlier, it had targeted implementation by April 1, 2017.

While several state finance ministers said that it may not be possible before September, sources in the government said that “the ground work is done” and once pending issues including the one relating to dual control are resolved, GST can be immediately rolled out. The government also has the option of putting the pending issues for voting though finance minister Arun Jaitley has underlined the need to resolve them through consensus.

“We are ready with the necessary backbone and ground work, as soon as the issues are resolved and Parliament approves the remaining bills, we will go ahead with GST,” a senior government official, who did not wish to be identified, told HT. The government, however, will have to factor in the delay while estimating the collection figures of indirect tax for the next financial year.

“The finance minister must carefully do the calculation relating to collection figures (of the indirect tax) in the Union Budget,” Soumya Kanti Ghosh, chief economic adviser of the State Bank of India group added.

Sources said that once the all powerful GST Council resolves all issues, bills relating to Central GST and Integrated GST will be taken up during the session.

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Rekindle the spirit of Team India to implement GST

A meeting of the GST Council – an empowered group of state finance ministers set up to frame rules, rates and modalities of the new tax system – held through Tuesday and Wednesday ended in acrimony after several states pressed for a review of what had been agreed upon before, in the words of West Bengal finance minister Amit Mitra, the “financial emergency” set in. It is now widely expected that the government will miss the April 1 deadline it had set to give effect to the proposed common tax.

There has been no windfall in revenues for the government or the Reserve Bank of India, as was expected by some proponents of demonetisation. Consumer spending and the informal sector have been hit hard, slowing down the economy. Credit off take remains sluggish although banks, nudged by the government, are lowering interest rates. The bad news doesn’t end there. This past week, demonetisation claimed its latest, and perhaps the biggest, casualty — the much-desired and much-awaited implementation of the GST.

In August, all states and political parties agreed to a constitutional amendment that would make GST a law, on the promise that it would be implemented on the principles of cooperative federalism. Also, it was agreed that states losing revenues because of the common tax would be adequately compensated by transfer of funds from the central exchequer — about Rs 55,000 crore over the next five years. This was a big win for the NDA government because independent India’s biggest tax reform was finally becoming a reality after years of intense negotiations. Demonetisation, however, cut short the euphoria. Several states have now returned to the negotiating table to bargain afresh. They want much more in compensation from the Centre, because their revenues from sales and other local taxes were hit hard as people went short on cash and spending in the aftermath of demonetisation.

That the economy is unlikely to recover soon has added to their fears that they would continue to raise less in revenue than what was projected at the time of agreeing to GST.

The demand for higher compensation apart, new fault lines have surfaced within the GST Council, which is finding it difficult to reconcile differences between the Centre and the states in matters relating to jurisprudence and control — who taxes whom and what. Some state finance ministers have gone to the extent of accusing the Centre of reneging on the principles of cooperative federalism. If that sense is to gain ground, then we might be looking at a scenario where the government at the Centre will be too weakened to push through reforms or changes that need states to be on its side. It could well turn out to be a repeat of the policy paralysis phase we had seen in the terminal year of the UPA regime.

At the time Parliament passed the GST bill, Prime Minister Narendra Modi had described it as “a great step by team India.” It is up to him now to rekindle the spirit of “team India”.

From Sources:-