Finance minister Pranab Mukherjee indicated Thursday that the ambitious Goods and Services Tax (GST) has become “hostage of contemporary Opposition politics” in the country. While some states, including Tamil Nadu, had
raised the issue of autonomy at the recent National Development Council meeting, the fact is that even the Centre will lose its exclusive right to tax services in the proposed GST.
In an exclusive interview to this newspaper, the finance minister pointed out that major political parties have made a commitment to support GST. “The BJP has made a commitment to introduce GST. The Left parties have tendered support. Now they must redeem their word, we require their support,” he said. On issues ranging from corruption to legislation, the finance minister, tackling all contentious issues troubling the UPA-2, said: “Well-established and time-tested institutions should not be dismantled, institutions should rather be strengthened... You can’t create anarchy by destroying systems and institutions.”
On the economy, he pointed out that if one talked of “autonomy in the context of the existing constitutional framework, then these aspects should be clearly understood and should not become a hostage of contemporary Opposition politics. Because here it is decided that the Centre that has now exclusive jurisdiction to impose taxes on services, will relinquish its authority. Similarly, states will also have to give authority to the Centre to impose taxes on sales.” On the perception of some states that they might lose revenue, the finance minister noted that such fears were also expressed during the introduction of VAT. “But VAT has increased the revenue of states and didn’t cause any loss,” Mr Mukherjee said.
The GST has already missed two deadlines: 2010-11 and 2011-12. The government is now trying to be enforce it from the beginning of the next financial year: April 1, 2012. The GST is meant to replace existing levies such the state VAT, besides the Centre-imposed excise duty as well as service tax.
Mr Mukherjee pointed out that all major political parties had committed themselves to supporting GST in their election manifestos. “The BJP had made a commitment to introduce GST. The Left parties had tendered support. But now they must redeem their word, we require their support,” said the finance minister.
Mr Mukherjee noted that the government had introduced a Constitution Amendment Bill in Parliament. It will now first have to come to the Lok Sabha, after being scrutinised by the standing committee. “Thereafter we will require the support of political parties other than the ruling party because it requires a two-thirds majority. This is an amendment that will require ratification by 50 per cent of states. Therefore the players are many, not merely the ruling party,” he said.