GST will integrate India into a single market
The proposed Goods and Services Tax (GST) Bill which is supported by a record number of States at the Empowered Committee of Finance Ministers on Tuesday, will bring forth one of the biggest tax reforms of independent India. The GST will introduce a ‘single tax regime' that overhauls the indirect tax system of the country. It will integrate the country into a common market by introducing a uniform set of rules that will replace the current barriers to trade between States, and States and the Centre. Further, it will subsume all indirect taxes of the Centre and States, including excise duty, value added tax, service tax and octroi. Though there has been a strong resistance from the Congress-led opposition in Rajya Sabha to the Bill but with the latest developments at the Empowered Committee it can be rightly said that despite having differences with the BJP-led National Democratic Alliance at the Centre, majority of the non-Congress ruled States have supported the Bill. This must be credited to the leadership of Prime Minister Narendra Modi and Finance Minister Arun Jaitley who have worked tirelessly on the fine details of the Bill, indicating the prospective growth and benefit of the States under the new tax regime.
The GST Bill was passed in the lok Sabha in May 2015 as the 122nd Constitutional Amendment Bill. But it could not be finally passed in the Rajya Sabha as the Congress demanded a ‘provision for constitutional cap' on the GST rate for lending its support. It must be noted that today there has been complete consensus on having no constitutional cap foreseeing emerging exigencies in near future. This shows how majority of the states have expressed their willingness to move ahead with the progressive financial reforms unleashed by the Modi Government by simply dumping the regressive and obstructionist mentality of the decaying Congress. In fact as the Congress demands that there should be a constitutional provision for cap on GST rate, this will go against the legislative sovereignty of both the Centre and the States because there will be no room for meeting contingencies. Realising this, a record number of 22 States present in the last meeting of the State Finance Ministers agreed to the basic idea of the GST and offered their full support to the Union Government. Congress should have never opposed the GST Bill and wasted the precious time of Government.
The new tax system may bring wrenching economic change for the States, but the assurances given to the States by the Finance Minister that any notional losses suffered by them on account of a switch to the GST regime will be compensated by the Centre, should be appreciated. Also the Minister was of the view that the Union Government is flexible on the demand of scrapping a one percent additional tax on inter-State sale which will lead to a higher outgo from the Centre to the States. Tamil Nadu has not backed the GST Bill saying it will amount to huge loss of revenue and fiscal autonomy. But it is hoped that Centre will win Tamil Nadu's support. The new legislation is expected to enhance the GDP by one to two per cent. Barring all differences, the pragmatists say that the country must go ahead with this piece of progressive legislation.