India on course to ‘one nation, one tax’ regime
After months of wrangling between the States and the Centre over Goods and Services Tax (GST), there has been a welcome breakthrough. Unfortunately, the timing of the rolling out of the new tax regime has now been pushed to July 1; the earlier expectation was that it would be become effective by April 1. Nonetheless, the consensus demonstrates that hurdles in the process of implementation in the future can be settled in an amicable manner. Needless to say, efforts taken by the Centre, particularly the Union Minister for Finance Arun Jaitley, has paid dividend, in sorting out the tricky issues between the Union and the State Governments. Above all, the States’ massive support to bring the country's first unified indirect tax regime, must be hailed. Despite having serious differences, both on ideological and regional lines, with the BJP-led NDA Government at the Centre, some of the State Finance Ministers offered their expertise and support to help unfold the GST structure. It was a sign of cooperative federalism at its best. There were times when the naysayers had aired their contention that the GST was nothing but one more mechanism by Prime Minister Narendra Modi to tighten his grip over the States. At times, even voices were raised against the GST on the lines of regionalism. But a majority of the States clearly understood the future benefits of such a tax reform measure, as this will help States to streamline the ossified tax system of the nation. Beyond this, the very idea that ‘business drives tax, and not the other way round', will now be reversed, with the coming of the GST.
In the ninth meeting of the GST Council, the Centre and the States came to an agreement over sharing powers for control over taxes under the GST. Further, the next Council meet has been slated for February 18, to finalise the drafts of the integrated GST and related legislations. On the issue of dual control, where the States pitched for exclusive power over small units with an annual turnover of Rs 1.5 crore, now 90 per cent of these units will be under the States, and the rest will be with the Centre. For entities above this slab, there will be equal control by both the Centre and the States. At a time when the Centre and the States clinched the GST deal, West Bengal, which demanded 100 per cent control of States over small enterprises, was left isolated. Another remarkable decision taken by the Council is that all the States will be able to levy tax on the economic activities on high seas or within 12 nautical miles of the coast, though constitutionally the Centre has full jurisdiction over territorial waters. It seems the political seesaw over the GST regime is over. It is now to be hoped that the system kicks off by July 1 and doesn’t run into fresh problems. The constitutional requirement is that it should be rolled out by September, but there is no reason why the country should wait until that day for the ‘one nation, one tax’ reality.