Batting for good GST: Far from being ‘obstructive’, Congress is making sure the new law actually encourages growth

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By Randeep Singh Surjewala and Muhammad A Khan

Let one thing be unequivocally clear: Congress Party has never been opposed to the idea of the Goods and Services Tax. Considering the original claim to authorship and conception of this law rests with us, that would be a disingenuous proposition. As its exponent, Congress advocates the creation of a meaningful, effective and implementable architecture of GST.

Yet in the last session, Congress’s opposition to certain aspects of the modified law was labelled ‘obstructive’ by those who opposed it for six years inside and outside Parliament. Ironically, there has been no variance in our position since the previous session but now the government seems more receptive to the idea of debate.

We now stand in the middle of a new winter session and it is important to understand the finer points of the Congress party’s concerns. While there are eight substantial points of difference, there are three core fundamentals on which attention is required.

First, GST rates have to be moderate and reasonable so that an unfair burden is not imposed on ordinary consumers. For this, there must be a constitutional cap on the GST rate to be charged – this should preferably be 18%.

Congress has insisted that an outer cap of 18% is reasonable as against a proposed rate of 24%. It would otherwise defeat the very purpose of having a consolidated GST which is to ensure that the ultimate amount levied is not onerous or oppressive for the final consumer.

The government argues that the idea of hardcoding this into a Constitutional Amendment removes flexibility. Perhaps. But Congress argues in response that the rate should be deliberately difficult to manipulate and that there already exists precedent for this proposition.

Given all that has been said in defence of GST by the ruling establishment, a fixed rate seems like a fairly reasonable idea.

Second, the levy of an ‘additional tax’ of up to 1% by manufacturing states over and above the GST rate not only leads to market distortion but it’s also an extra burden and an embargo on movement of goods from one state to the other.

Our representatives in the select committee have argued that such a levy would be counterproductive inasmuch as it amounts to administrative interference in the markets. Contrast this with the provision that requires states to be compensated for revenue losses and one finds a sufficient safeguard – that too for a period of no less than half a decade.

Third, there is the need to create a Dispute Settlement Authority. To understand why the existing GST Council is problematic when it comes to settling disputes, we may take recourse to a hypothetical illustration where a state such as Maharashtra may have an objection to the amount of tax revenue being returned.

The matter will be referred to the Council which will inevitably have Maharashtra as a member. Thus, Maharashtra will be deciding on the fate of its own levies. This is a violation of the very basic tenet of the rules of natural justice – one cannot be a judge in one’s own cause.

Thus there must be a quasi-judicial body, at arm’s length, comprised of independent individuals who would be qualified to decide upon such disputes. This is not a new proposal as it existed in the original GST Bill – the 115th Constitutional Amendment moved in 2011by UPA.

There are other concerns as well. Exempting goods/commodities such as alcohol, electricity, petroleum products and tobacco from the purview of GST runs counterproductive to the very idea of a consolidated goods and services tax being advanced. At the very least, a deadline should be placed for a decision to be taken on the fate of bringing these products within the architecture of GST.

The voting pattern of the GST Council giving a disproportionately high presence to central government vis-à-vis states goes against the principle of cooperative federalism advocated by the government so often. States must have a greater role as ultimately, the revenues collected are from the states and from the economic activities generated in their regime.

Similarly, a clear definition of the term ‘supply’ in inter-state commerce is essential and cannot be left to administrative discretion. The manner in which revenue trickles down to panchayats and municipalities needs to be better defined to make grassroots bodies true partners in our nation’s progress.

No one can argue that these concerns are less than genuine. We would be remiss in our duty as the principle party in opposition if we did not evaluate the impacts of a law that many perceive to be of supreme importance in encouraging economic growth.

Whether the GST Bill goes through with or without addressing these concerns will unfold in the days to come. But one thing of consequence has already been accomplished: the government has learned the importance of conciliation and engagement in a democracy.

Source:http://blogs.timesofindia.indiatimes.com/toi-editorials/batting-for-good-gst-far-from-being-obstructive-congress-is-making-sure-the-new-law-actually-encourages-growth/#

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