Finance Minister Arun Jaitley announced recently that almost all states except Tamil Nadu are on board on the draft Goods and Services Tax bill that aims, among other things, to take away most autonomous taxation powers from the state governments.
GST will replace almost all taxes that the state governments and the Union government now exact on goods and services. From being opposed by the then-Chief Minister of Gujarat, Narendra Modi, to now being furiously pursued by the Union Government of India, led by its Prime Minister Narendra Modi, the Goods and Services Tax bill has come a long way indeed.
And although it has come a long way, and it has picked up new converts to its cause along the way like the incumbent Prime Minister, the GST idea has not fundamentally changed. The GST still represents, as originally conceived, as the greatest assault by the Union government on state rights and autonomy in general and revenue collection rights of states in particular.
While most other parties, including some erstwhile opposers of the GST, are now on board due to reasons that are best known to them, none has been able to explain why they have come around to support such a grave attack on state rights and hence on the federal structure of the Indian Union. One party that does not need to do such explaining happens to be the 3rd largest party in the present Lok Sabha, the AIADMK.
The ruling party of Tamil Nadu has remained steadfast in its opposition to the GST at a time when “negotiations” have pretty much ensured the passage of the GST and its implementation, sooner or not too later.
The unfortunate pro-Centre nature of Constitutional amendments is that even on matters that directly affect rights of the state, laws can be imposed on Tamil Nadu. Thus, Tamil Nadu’s taxation rights can be taken away even when Tamil Nadu might oppose such infringement. The opposition by the AIADMK has more symbolic value than an actual threat to GST.
But, in terms of optics, it looks bad if the consent of one of the most advanced large-scale industrial manufacturing states is not gained as part of the GST bill passage rites – in the form of a Constitutional amendment.
In the select committee report on the 122nd Constitutional amendment bill that will snatch most taxation rights of the state, the AIADMK presented a dissent note. What does that say? Firstly, it points out that an unelected GST council “impinges on the legislative sovereignty of both Parliament and the State Legislatures”.
AIADMK opposes such an unelected GST council’s sweeping powers on such a fundamental matter such as taxation. Secondly, it calls out the conspiracy against federalism embedded in the GST council by stating clearly that the council “completely jeopardises the autonomy of the States in fiscal matters”. In terms of decision-making rule and voting weightage in proposed council, “they give the Government of India an effective veto in the GST Council and no distinction is sought to be made amongst the States in weightage”.
It exposes the Union government’s design of controlling GST council by giving it one-third of the total votes in the council. Basically, then a Union government and a small minority of ruling party led state governments can force any decision or the majority of states.
Thus, AIADMK demands, “if at all a Council is formed, the weightage of the vote of the Central Government should be reduced to one-fourth of the total votes cast and that of the States should be increased to three-fourths of the total votes cast. Further, the weightage of each State’s vote should be in proportion to the representation of each State in the Council of the States.
This is important as the changeover to GST has different implications for different States based on their size and reliance on own tax revenues”. The existing arrangement for deciding on VAT related issues is an Empowered Committee of State Ministers.
GST council proposal brings in the Centre with huge voting powers. AIADMK has argued that the existing Empowered Committee of State Ministers is adequate for GST also. Why is it inadequate and why does the Centre need to hog so much power if it actually cares for federalism and not bulldoze the voices of the states, is a question that Arun Jaitley has never answered or has chosen to ignore. That should be a good indicator of the sharpness of AIADMK’s intervention and its readings into the real intent of the Centre.
Most importantly, the AIADMK dissent note marks out the most important aspects of the GST bill, which might explain why big corporates and corporate funded Delhi think-tanks and media are clamouring in its support. AIADMK states, “Some provisions of the Constitution (One Hundred and Twenty-Second Amendment) Bill i.e. Goods and Services Tax Bill are likely to adversely impact the federal structure of the country.
There is a need for decentralisation of powers and devolution of the taxes in favour of the States and further to the Local bodies. Fiscal Federalism and protection of the powers of the states is important”. And finally nails it by saying, “The clauses are designed in a way that the Centre will have absolute powers in deciding tax proposals. This is likely to harm the concept of Union and States.
It will be turning into a structure of Union alone…GST should not be in the interest of big corporate houses, who want a free flow of goods and services with the technology promoted and owned by them. With the Centre having an absolute say over the decision-making process on the GST, the States will lose its financial independence in the long run and corporate will dictate the policies of even the local Governments”.
GST bill is aimed at corporate control of one of the most important democratic mechanisms of people’s control over revenue and resources.Select committee dissent notes are usually along partisan lines. This one is an exception that sees the Congress and BJP together. AIADMK traditionally has had good parliamentary coordination with the BJP.
Hence, AIADMK’s dissent matters – since it has broken with the government and the opposition, its steadfast and principled opposition to GST. Hence, even if its eventual defeat, the dissent by Tamil Nadu is important to take stock of the other narrative, about why many people, in Tamil Nadu and outside Tamil Nadu, not belonging to big business, business media, and think-tank business, oppose the GST.
Thus, the AIADMK viewpoint is not a Tamil viewpoint but the viewpoint of a federalist party that other parties often opportunistically shouting for federalism have ignored, probably due to illiteracy of its MPs as well as rank and file on the implications of GST. It’s important that we listen to what the AIADMK is trying to say. It is probably one of the most important decisions that will be taken in the lifetime of the Indian Union. And at present, there is no consensus.