Tamil Nadu, which had earlier opposed the goods and services tax (GST), has signaled its willingness to join the indirect tax regime. However, it has asked that the deadline for rolling out the tax regime be deferred. Tamil Nadu School Education and Sports and Youth Welfare Minister K Pandiarajan tells T E Narasimhan and Gireesh Babu that all the states should implement the tax from a common date, preferably September 1, 2017, which, he said, was an option that the Constitution amendment provides. Edited excerpts:
Despite concerns raised by the state earlier, it looks like Tamil Nadu is ready to go ahead with GST?
We have no choice, but we want to shape it in a certain manner, which is what we are doing. Many details are being worked out, including the threshold below which there will not be any taxes, and the ceiling above which the tax kicks in. All these issues are getting settled one after another. Even the issue of voting rights for each state was discussed last week.
Wednesday is the second meeting of the GST Council and we hope to resolve another six issues and October 16, 17 and 18 in the marathon debates, when rates will get finalised.
Though opposing GST, states have the responsibility to shape it in a way that supports their interests.
For instance, taxation benefits that we have given in southern Tamil Nadu, we may have to redefine them, it can’t remain the same. Each of the fiscal benefits we have extended to the people, we need to see how it is possible to protect them. We are talking about the four rates in the GST. Within that structure, we need to fit in all the present taxation models, so that you don’t suddenly remove benefits in an unintended manner. That is what we are working through. We are also working on the structure of tax collection, with around 60,000 employees both in central and state governments. Those people have to be deployed in a different way. With all being merged into one, you will need to find ways in which the clients won’t be harassed. We are evolving certain protocols by which each customer gets visited only by one authority. That is another structural challenge the GST Council has addressed to some extent. We are most likely to finalise that. By and large there has been consensus. I hope it will continue in the rest of the meetings, too. Discussion on the compensation process and quantum are going along with what we think, but we will watch the decisions.
The state has raised issues related to compensation. What is the current position?
We have been talking about the principles of compensation. It will be premature for me to share the internal discussions, but we will arrive at decisions on Wednesday on the compensation methodology and the principles, and we will know if we will get Rs 9,720 crore or less or more. The Rs 9,720 figure crore was worked out based on a few assumptions such as manufacturing tax, which was separate from GST. Now, we will have an integrated tax, so there is a school of thought that our tax revenue actually may not fall, even in the new GST regime, because they agreed to split the service tax with us, while we were receiving only around four per cent earlier. So, many changes have been made in the month since the GST Counsil was constituted.
While the Centre has proposed to implement GST from April 1, 2017, TN wants it to begin from September 1, 2017?
September 2017 is what we as a state would want as the date to roll out the regime. Every state has a choice. States could have one year to readjust. But one state moving to the new regime on September 1 and others on April 1 is not a tenable position, though there is such a choice by law. If everybody moves together, there is no problem. Even if we continue at the breakneck speed at which we are going currently, with 31 people sitting together and taking calls, the earliest date would be September 1.
How many issues were raised by Tamil Nadu?
There were five broad areas on which discussions took place in the past two days. We had a consensus on all of them, except one, which will be listed again on Wednesday, since they wanted to present more data. It is on the question of Rs 1.5-crore ceiling below which the state government will have complete jurisdiction and above which both governments will have claims. We asked for client-specific ownership of jurisdiction. A decision on that will hopefully be arrived at on Wednesday.
A compensation principle will also be decided on Wednesday. There is some consensus, but we wanted the words to be drafted properly and then presented to us to take the formal concurrence.
Were the discussions fruitful?
Discussions were meaningful, we did get opportunity to articulate our concerns and could shape the way the GST regime is going to emerge from now. We had a fairly tough fight and states such as UP, Kerala and Jammu and Kashmir supported our stand.
There was broad support for our stand, especially on compensation. We wanted the best three years out of the last six to be considered while calculating the growth rate. Our stand that the base year be 2016 was also accepted. I saw some flexibility, but there were some issues on which they were rigid, especially related to the role CBEC. But no issue had to be put to the vote, which is very positive.