Bill falls short on what we had agreed: T M Thomas Isaac

Interview with Finance Minister of Kerala

Soon after the Rajya Sabha passed the goods and services tax (GST) Constitution (122nd Amendment) Bill, Kerala Finance Minister T M Thomas Isaac wrote to Union Finance Minister Arun Jaitley to protest against deviations from an earlier consensus. In an interview with T E Narasimhan, he explains Kerala's position on various issues related to the GST. Edited excerpts:

What is Kerala's stand on the GST?

We have been supportive of it from the beginning over a decade ago. That position remains unchanged. But, there are issues to be negotiated between states and the Centre. We would like to use this opportunity to set right certain imbalances in Centre-state fiscal relations.

What issues have you raised?

We do not agree to this 18 per cent GST rate; we want a higher rate. The GST revenue will be shared equally between the Centre and states. We would like a higher share for states. If the GST rate is 22 per cent, it can be 12 per cent for the states and 10 per cent for the Centre.

The state GST does not infringe upon other states. States that want a higher SGST should be provided the flexibility. We also do not want the Centre to have concurrent tax collection on transactions below Rs 1.5 crore. That will result in harassment of traders. The states will have to face trader resistance.

You have written to Jaitley against the constitutional amendment Bill...

The present Bill falls short on what we had agreed upon. First is 'full' compensation (for revenue loss to states). The 'full' has been left out. After much deliberation, 'full' was introduced to ensure compensation did not taper off in five years.

Second, Clause 10 of the Bill presented in the Rajya Sabha goes against the decision of the Empowered Committee that the residual amount in the integrated GST account be shared with states. The amendment goes against the basic design that all taxes of the Union form part of the divisible pool.

Still, a solution is possible. But once you reach a consensus, you should not unilaterally change it. That will affect faith among stakeholders.